Proprietorship Registration

What is Sole Proprietorship in India?

The proprietorship is a popular form of unregistered business entity owned, managed, and controlled by a single individual. In the unorganized sectors, the majority of micro and small companies prefer registering as a proprietorship.

As a sole proprietor, you are not required to comply with many regulations and can start your business very quickly. Entrepreneurs just starting out with a few clients are ideal for owner-operated businesses.

Who is a Sole Proprietor?

Sole proprietors are owners of a business. It is not a corporation or legal entity. Proprietorship and proprietor are the same legal entity.

The PAN and other documents of the proprietor are required for all registrations and  licenses. In the event of any liability in a business, the proprietor is personally liable.

Registering a Proprietorship firm in India requires no formalities or registration. It is necessary to obtain a business license as required by the state/central government. Further, if the business name is unique, then it is better to Register a Trademark.

Irrespective of the type of entity, business licenses are a must for any permit. For any applicant, before registering a Proprietorship in India, it is necessary to understand the regulatory framework which surrounds the activity he wishes to undertakes and obtain relevant licenses. From the respective Local, state, and Central Government authorities.

It is necessary to obtain Tax registration from the relevant Tax authorities, which are based on the type of activity the Proprietors perform.

This includes GST registration, Professional tax registration, and ESI/PF registration.

As there is no registrar for Proprietorship in India. Proprietorship can usually be operated under any name unless the name doesn’t conflict with any trademark registration and other rules and regulations.

If a person is investing enough time and money in the Proprietorship or if the business and wants the goods and services offered by him to be identified exclusively, it is always recommended to get a Trademark registration.

What documents are required for registering a proprietorship in India?

The entire process for proprietorship registration can be completed online. You will just have to upload the following documents:

Identity Proof - Aadhar & PAN Card
Address Proof - Latest Bank Statement
Passport size photos
  • Complete Control- Proprietorships firms are owned and operated by just one person. The owner has full authority and can make all the decisions as no partners are involved to consult.

  • Easy Setup- As no registrations are required to start, a proprietorship can create and receive payments from clients very easily

  • Easy Compliance- The significant advantage of the Proprietorship is that it doesn’t require any additional compliance in most cases. The PAN of the Proprietor and Proprietorship are the same. Hence, in most cases, only income tax returns in the form of ITR3 must be filed every year.

  • Dissolution- If an individual has to cease operation, he does not have to wind up the company significantly. This undoubtedly saves time.

  • Requires less investment- 

    Registering a proprietorship in India requires very little investment. Hence, anyone who wants to start business with low funds can go for proprietorships as no investments are involved.

  • Information is not disclosed in public- The Proprietorship firms’ financial reports are public like that of the LLPs, where the financial statements are made public.

  • Liabilities: The proprietor is held liable in case of any loss or harm as the Sole Proprietorship does not provide the proprietor with limited liability protection.

  • Transferability: Any license or registration that has been obtained in the name of the Proprietorship cannot be transferred to any other person or an entity.

  • Lifespan: The existence of the Proprietorship is tied to the proprietor. Hence, it will cease to exist with the proprietor.

  • Cannot raise funds: Proprietorships cannot raise equity funds from angel investors, venture capital firms. Banks also have certain limitations on the amount of credit they can lend.

Due to this reason, the registration will be only suitable for small businesses and the unorganized sector.

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