The individual willing to start their business at smaller scale opt for the most flexible form of business in India being Sole Proprietorship Firm. Sole Proprietorship Firm is popular business in India due to its simplicity, ease of setup & administration and nominal cost involvement. It is the simplest form under which one can carry on the business which has no separate legal existence from its Owner.
In the Proprietorship Firm business, the individual (referred as Proprietor) himself is the sole owner of the whole business and also carries the burden and responsibility of the business and its operations.
Why to choose Sole Proprietorship Firm?
Here are top 7 advantages listed, which shall be considered as ground of your decision to start business:
- There is nominal cost involved in formation of Sole Proprietorship Firm. The cost involved to start the business is to register a proprietorship firm with the government only, which are very minimal compared to other form of organisations.
- The sole ownership of the Business gives the freedom to owner to do the things as per his own discretion which combines with the holding of control and responsibility of the firm.
- In this business, the Proprietor is the only owner who fetches all the profit from the firm and do not need consent of any other person. He has to decide which amount is to be withdrawn or to be reserved as investment for the growth of the Business. Also, the losses of the firm are accounted to the Proprietor only.
- The administration of the firm can be as per the willingness of the proprietor and no on-going maintenance requirements are to be complied with for running the Sole Proprietorship Firm once the business has been started.
- It is the sole discretion of the owner how to operate the business and no external interference is involved for decision making or otherwise because of which the Proprietor enjoys the freedom of administration of the firm on own decisions.
- The formalities with regards to preparation and maintenance of Financial Statements are voluntary in nature and the Proprietor is not accountable and answerable to other parties. No requirement of audit is prescribed for this business except the turnover/ receipts of business reach a certain limit. The preparation of financial statements are not mandatory however advisable so as to ensure monitoring over all transactions of the medium sized business.
- The Sole Proprietorship Firm is at upper hand for taxation aspects The income of the business is taxable in the name of Proprietor and hence the tax slab is applicable, which is more beneficial to small and medium size businesses compared to taxation rates in other business organisations.
How to start business under Sole Proprietorship Firm:
Read below to get answers of “Which registrations are required?”, “How to register a Sole Proprietorship Firm” or “what processes shall be followed in order to reach at operational stage?”
Where the Sole Proprietorship Firm is an unregistered form of organisation, for opening of the Current Account in the bank, the officials require the certificate of Sole Proprietorship Firm registration in order to satisfy their KYC Policies. Following are the schemes or under which registration of sole proprietorship firm can be obtained
- Registration under Shop & Establishment Act:
Registration under this Act is done with local government, through which one intimates the Local Government about the business activities carried on at the place. This registration is intimation of business activities irrespective of the organisation structure. This registration is mandatory in nature. Registration fees and procedure varies from State to State, however one shall register within 30 days from starting the business activity at any place.
In addition to the above registration, Professional Tax Registration shall be obtained wherever applicable. The same is mandatory in some Part of India.
- Registration under MSME Department:
MSME stands for Micro, Small and Medium Establishments. The MSME is the Department of Central Government, registration under which allows the person to claim benefits under various schemes declared by the Government for specific Activities. The registrant can also avail the loan from Financial Institutions at subsidized rate of interest.
The most beneficial part of registration of Sole Proprietorship Firm under MSME Department is to claim the rebate under Online Trademark Registration in India under Trade Marks Act, 1999. The entity registered under this scheme can get rebate of 50% on the Government Fees for Trademark Registration in India.
- GST Registration:
Registration of Proprietorship Firm under Goods and Service Tax shall be mandatory in few cases based on the nature of transactions or turnover limits as prescribed by the government. Please refer our blog GST Registration – Process, Rules, Forms and Documents Required for more information regarding registration under GST.
Registration of Proprietorship Firm under Goods and Service Tax shall be mandatory in few cases based on the nature of transactions or turnover limits as prescribed by the government. Please refer our blog on GST for more information regarding registration under GST.
- Other Registrations:
There are few activity specific certification requirements levied under various laws in India. For Example, for running the Restaurant, the online FSSAI registration, commonly known as food licence is also required. In the same manner, the registration under Factories Act, 1948 is mandatory to establish a factory with specified number of workers. The requirement of obtaining IEC Registration arises while indulging into import or export of goods or services.
The Sole Proprietor can commence business activities as soon as obtaining certificate of above mentioned Registration. Also the registrations can be obtained after and during the operations of activity.
A Sole Proprietorship Firm can operate in the name of its owner or otherwise under a fictitious name. The fictitious name chosen is simply a trade name and not a legal name because sole proprietorship firm is not having any distinct identity from the owner. Further, while choosing the trade name, one shall keep in mind that it is not similar or identical to the Trademarks Registered with the Registry of Trademarks.
The Proprietorship firm is for the businesses for the small scale businesses and where the risk involved in the business is very low as the owner shall pay the debt of Business form personal assets of the owner. One shall look after the pros and cons for choosing the particular kind of entity in order to confirm the stability and scope of expansion on long run. Before stepping into business world, a consultation of professional is must to get insight about the taxation and aspects to be taken care for specified business activities.