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Your Sole Proprietorship Registration
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A sole proprietorship firm means a type of business entity that is owned, controlled and managed by a single person. The owner of the Business is called Sole Proprietor of the Firm. As the business is run by a natural person, there is no legal difference between the promoter and the business. The promoter himself receives all the profits. Sole Proprietorship firm does not require any formal registration.
Benefit of Proprietorships Businesses
Low Compliance Cost
One of the major advantages of Proprietorship Firm Registration in Delhi is the low compliance cost. Unlike a Private Limited Company, which incurs an incorporation cost of around 10 to 15 thousand, a sole proprietorship business does not require such high startup costs. An audit is only applicable if the gross receipts/turnover of the proprietorship entity exceed Rs. 2 Cr. Additionally, there is no need to file annual returns, unlike a Private Limited Company.
Very Flexible
Under a proprietorship business, you can simply pay tax at 8% of your turnover/gross receipts, provided the turnover/gross receipts do not exceed Rs. 2 Cr. in the previous financial year. This flexibility makes Proprietorship Firm Registration in Delhi an attractive option for small business owners.
Easy to Start
While Private Limited Companies take 10 to 15 days for incorporation, a proprietorship requires minimal time to get started. For the startup of a proprietorship, there is no need to get name approval from any authority, such as the MCA. This makes Proprietorship Firm Registration in Delhi a quicker and more straightforward process.
Control
As the sole owner of the business, you have complete control over all the operations, and you get to make all the decisions. You don’t have a Board of Directors, shareholders, or other owners to answer to, which makes managing your business much simpler.
Cost for Sole Proprietorship Registration
ESSENTIAL
₹ 1499/-
(All Inclusive)
SSI/MSME Registration.
Easy EMI's Transparent Pricing
ENHANCED
₹ 2999/-
(All Inclusive)
SSI/MSME Registration
GST Registration
Easy EMI's Transparent Pricing
ULTIMATE
₹ 8899/-
SSI/MSME Registration
GST Registration
Trademark (1 application 1 class) (start ups, proprietorship & small business)
Easy EMI's Transparent Pricing
Compliance required by Proprietorship firm
GST Registration
GST registration is one of the ways to get a proprietorship registration done. You can get yourself registered under GST if your annual turnover is more than Rs. 40 lakhs. Also, if you are doing online business (selling through amazon, flipkart etc.), you are required to get a GST number under goods and service tax Act.
GST Return
The proprietorship firms registered under GST are required to file the GST return on a monthly, quarterly and annual basis. GST return is a document that contains the details of the income of the taxpayer. As filing of GST returns is mandatory for all the registered Taxpayers including Partnership firms.
MSME registration
You can get yourself registered as Small and Medium Enterprise (SME) under the MSME Act. The application can be filed electronically. Although it isn’t compulsory to register as an SME, it is highly beneficial, especially at the time of taking loan for the business. Also getting Udyam Aadhar Registration will be very beneficial.
Accounting
The accounting for a sole proprietorship does not require a separate set of accounting records, since the owner is considered to be inseparable from the business. Nonetheless, it is always advisable to maintain records for business activities of a Proprietorship firm, in order to judge whether these operations are generating a profit.
IT Return
Income tax filing must be filed by all proprietorship having a taxable income over the exemption threshold. In some cases, a tax audit would also be required. Since proprietorship is considered to be one and same as the proprietor, the income tax return filing procedure for a proprietorship is similar to individual income tax return filing.
Tax Audit
There is no obligation for a sole proprietor under any law to get the accounts except in case where the turnover of a proprietary business in any financial year exceeds 1 Crores Rupees and gross receipt from profession exceeds 50 Lakhs Rupees. In both cases, the audit of accounts is compulsory for a proprietor under the Income Tax Act.
ENTITY COMPARISON GUIDE
| TYPE | PROPRIETORSHIP | PARTNERSHIP | LLP | PVT | OPC |
|---|---|---|---|---|---|
| Members | Maximum 1 | 2-20 | 2- Unlimited | 2-200 | 1 |
| Legal Status of Entity | Not Considered as separate Legal entity | Not Considered as separate Legal entity | Considered as separate Legal entity | Considered as separate Legal entity | Considered as separate Legal entity |
| Members Liability | Unlimited Liability | Unlimited Liability | Liability of its members is limited | Limited to the extent of share capital | Limited to the extent of share capital |
| Registration | Not Compulsory | Optional / Can be Registered under partnership Act 1932 | Registered Under MCA | Registered Under MCA | Registered Under MCA and Companies Act 2013 |
| Transferability Option | Not Allowed | Not Allowed | Can Be Transferred | Can Be Transferred | Allowed to only one person |
| Taxation | As in Individual | 30% of Company Profit | 30% of Profit Plus CESS and Surcharges applicable | 30% of Profit Plus CESS and Surcharges applicable | 30% of Profit Plus CESS and Surcharges applicable |
| Annual Filings | Income Tax Returns with the Registrar of companies | Income Tax Returns with the Registrar of companies | Filed with the registrar of the company | Filed with the registrar of the company | Filed with the registrar of the company |
Procedure for Establishing Sole Proprietorship Business in India
The section below reflects the list of mandatory documents required for establishing a sole proprietorship business, including the Proprietorship Firm Registration in Delhi.
Step 1: Obtain Aadhar Card
An Aadhar number is a must-have requirement for legalizing any business in India. Additionally, an IT return can only be filed if the taxpayer has synced their PAN card with Aadhar. The applicant can approach the nearest Aadhar Seva Kendra or E-Mitra to secure the Aadhar number in a legitimate way.
Step 2: Apply for PAN Card
You cannot file an IT return without a PAN card. There is a dedicated government portal that enables a person to apply for PAN at a nominal fee. The standard documents required to apply for PAN include a photograph, ID proof, and address proof. The online submission of the PAN application can be made after validating it via Aadhar e-KYC. After this, it is scrutinized at NSDL for verification. Once successfully verified, the authority grants the PAN number to the applicant within a week. The hard copy is sent to the registered address within 15-20 days.
Step 3: Open the Bank Account in the name of Business
Open a Bank Account in the Name of the Business Once you have secured the PAN and Aadhar number, you can approach any designated bank to open a current account in the name of the business. Common documents required include PAN, Aadhar number, GST registration, and address and identification proof. The applicant can provide an NOC or rent agreement for address proof. Utility bills can also serve this purpose.
Step 4: Secure Shop and Establishment Act License
A Shop and Establishment license is a legal requirement for any commercial establishment that sells goods or services to customers. Owning a small establishment or shop is a form of business, and it is legally mandatory for the owner to secure this license.
Step 5: Register under GST
GST registration applies to all forms of business whose annual turnover exceeds the prescribed threshold limit. Currently, businesses with a yearly turnover greater than Rs. 40 lakh are mandated to secure this registration. Keep in mind that GST also applies to online business owners.
FAQ Frequently Asked Questions
Yes, provided the income of the sole proprietor is above the prescribed threshold limit as mentioned in GST law.
Commencing a sole prop business is not that tedious. To commence a sole proprietorship, all you need to do is:
Opt for a legally suitable business name.
Procure an apt location for your business.
File for business or state-specific licences that are in effect for the time being.
A sole proprietorship (aka sole trader, individual entrepreneurship, or simply Proprietorship) refers to a type of unincorporated establishment that is owned by a single person only. It is a simple business form that is quite popular in India.
The sole proprietorship model defies the concept of salary being transacted within the business. Whatever the owner earned as a sole proprietor is deemed his/her profit, not pay. However, you have the right to employ individuals and pay them a sole, but you cannot pay yourself that way.
Yes, a sole proprietor can be considered as self-employed because they operate business individually & do not work as an employee. Owing & operating your business affairs legally termed you as a self-employed business owner.
A sole proprietor lacks the adequate option for funding and third-party credit. Partnerships enable the business owner to share the operational and financial liabilities, thereby ensuring seamless growth for the business.
Most local establishments function as sole proprietorships, from grocery outlets to food vendors & even small manufacturers & traders. That doesn't mean that larger businesses cannot function as sole proprietorships. However, it is not advisable from a growth standpoint.
