Which businesses are best suitable for Sole Proprietorship?
From street to corporates, you see business in every corner. When you start serving or selling goods in return to monetary benefits it is simply a business activity, being it as a side business or full-time occupancy. From it is a slowdown in job creation to risk-taking nature of youth, self-employment has flourished in India in recent past and is a key concern for the Government as well. From household to consultancy, all businesses prominently choose sole proprietorship firm registration, with individual initiative. Among any other type of business structure, a proprietorship firm is the most popular structure chosen to commence a small scale business.
Sole proprietorship is the most basic form of business with flexibility to run. Easy to form, direct control over operations and less compliance requirements are the reasons to choose this form compared to other. Based on its characteristics, the business form is suitable for many activities ranging from local transportation and retail business to consultancy services. This structure would be appropriate for businesses in its initial stage and for those having less capital requirements, lower risk and small team of employees.
Here is the list of businesses most suitable as proprietorship firm based on features of the organisation:
- Less Capital requirements
- Lower Tax rates
- Independent operations
- Unorganised structure
- Lower operational risk
- Lower Compliance requirements
Retail Trading Activities
Retail activities such as selling of grocery, household goods, merchandise, electric goods, etc. can be carried on at very minimal risk by a proprietor. Initial capital requirements are also less which serves the purpose of choosing proprietorship. Bakery and general stores are also covered here.
Small Scale Gruh Udhyog
Small scale Gruh Udhyog runs with little capital requirements and with help of small team of workers. It involves less risk that match with the features of sole proprietorship to run. Food items like Khakhra, farsan, sweet and also agarbatti, handicraft items, etc. are covered under this category.
Catering business or food stalls do not require a corporate structure to be formed. The business can be easily maintained with few workers. The business requires direct control from one person and can be run in unorganised form; therefore proprietorship is right to be formed for this.
This is a kind of service which requires basic system requirements and can be handled with medium capital flow. Even a person single handed serve the business requirements here. Often freelancers provide services from home and work individually as proprietor.
Learning Assistance (Tutor)
Tutoring services are often provided by proprietors at home or at a suitable commercial place on rent. With help of few employees or on own, the services can be provided as a proprietor keeping whole sum of profit in pocket.
Freelancers operate independently on contract basis that requires no capital and can operate from home. Although one can start publishing company, this activity at initial stage does not require an organised form of business with compliance requirements.
Tax and Legal Consultancy
Chartered Accountants, Company Secretaries and Lawyers often choose proprietorship being in service industry. The business requires very less capital and the professionals are directly responsible for their actions irrespective of the organisation structure.
Clinic & Healthcare
Majority of the healthcare entities are started as a proprietorship firm in its initial stage. The proprietors seek to gain stability in the business first before taking it to an organised entity structure.
Local Transportation Services
Although the requirements of capital may be higher compared to other businesses mentioned here, the activities can be commenced with this structure and converted to another form once grown to a sustainable level. A person can operate individually dealing with consumer on requirements. Apart from goods transportation, passenger transportation is also covered here.
Repair & maintenance services
Repair and maintenance of automobiles, electronic machineries etc. are often provided at consumer place or garage. Computer repair and software maintenance are also covered which again can be served with or without separate place of business.
Above listed are the general categories of businesses that can be run as an unorganised form and as proprietorship at initial stage of business with a benefit of structural tax rates as individual instead of corporate taxes. With gaining sustainable growth, the proprietorship business can be converted into other forms such as partnership or limited companies. Capital funding, limited liability and strategic alliance with experts are often considered as reasons to convert the proprietorship to other forms. The proprietorship firm requires minimal compliance in form of filing Income Tax return in name of proprietor. Although business registration is not necessary, the owners prefer to register sole proprietorship firm in last few years owing to benefits of registration and credibility that leads to business growth. Also, the bank officials may demand the registration certificate of the firm to allow opening a current account for business. The proprietorship can be registered with Udyog Aadhar to claim benefits as MSM enterprise, GST Registration, Shop & Establishment registration, etc.
CS Prachi Prajapati
Company Secretary with a forte in content writing! Started as a trainee, she is now leading as a Content Writer and a Product Developer on technical hand of LegalWiz.in. The author finds her prospect to carve out a valuable position in Legal and Secretarial field.
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