Sole Proprietorship Firm Registration
Start, control, and manage your own business with a Sole Proprietorship registration!
What is a Sole Proprietorship Firm?
Most businesses in India start individually without other’s participation. An individual carrying out business activities is the sole proprietor and its business entity is said to be a Proprietorship Firm. The identity of an individual and the business are not different from each other. But due to the lower tax rate, flexibility and multiple advantages people prefer this structure for the early stage of business.
With the inclusion of partners, the control over operation reduces. Hence, these proprietors choose to run the business single-handedly and land upon sole proprietorship firm registration. Although there is no specific Act to regulate this organization, there are many ways to register a Sole Proprietorship firm. Small businesses aiming to take lower risks prefer this structure.
Benefits of Proprietorship Firm Registration
Documents required for registration of Proprietorship Firm
Establish Proprietorship in 3 Easy Steps
*Subject to Government processing time
Process to register Proprietorship online
Compare different business structures to choose the right entity type
|Private Limited Company||One Person Company||Limited Liability Partnership||Partnership Firm||Proprietorship Firm|
|Applicable Law||Companies Act, 2013||Companies Act, 2013||Limited Liability Partnership Act, 2008||Indian Partnership Act, 1932||No specified Act|
|PLC must be registered with MCA under the Companies Act||Same as Private Limited Company||LLP must be registered with MCA under the LLP Act||Partnerships can be registerd or Unregistered, there are obvious benefits to register with the State ROF||No registration required. Registration under MSME or GST act are considered valid for Proprietor Firms|
|Number of Owners||2 – 200||Only 1||2 – Unlimited||2 – 50||Only 1|
|Minimum of 2 to maximum of 200 shareholders excluding present or former employees who are members||Only one shareholder||Minimum 2 Designated Partners are required. No limit on the number of maximum partners||Minimum 2 partners, and maximum 50 partners||The proprietor can be the only owner of the firm|
|Separate Legal Entity||Yes||Yes||Yes||No||No|
|PLC is a separate legal entity, and can enter into contracts or own assets in it’s own name||Same as Private Limited Comapany||Same as Private Limited Comapany||Partnership firm does not have any separate identity from its partners||Proprietor and business are the same, and hold same PAN number|
|Limited to the share capital subscribed (may vary if defined as limited by guarantee or unlimited liability in the MOA)||Same as Private Limited Company||Limited to the capital contribution agreed by the partner in the LLP Agreement||Partners are jointly and severally liable to pay the debts of the Partnership Firm||Paying off the liabilities of the firm is the proprietor’s responsibility|
|Statutory Audit||Mandatory||Mandatory||Based On Applicability||Not Mandatory||Not Mandatory|
|Required to appoint a statutory auditor within 30 days of company incorporation||Same as Private Limited Company||Statutory audit required when turnover exceeds INR 40 Lac or contribution exceeds INR 25 Lac||No statutory audit required. Tax audit applicable on basis of total turnover||Same as Partnership Firm|
|Ownership Transferability||Yes||Yes (Restricted)||Yes||Yes (Restricted)||No|
|Shares are easily transferable, so it makes it a most preferred option for raising capital through external investors||There is only one owner in OPC. 100% shares need to be tranferred to change ownership||Ownership can be changed with consent of other partners, by drafting a supplementary agreement||Ownership is not easily transferable. Partnership deed outlines the restriction for transfer of ownership||Ownership of the proprietorship is not transferable|
|Private Company prevails with change in ownership or management||OPC has a perpetual succession, but can only have one owner at any time||Change in Partners or Designated Partners does not affect the existence of an LLP||Change in partner leads to dissolution or formation of another partnership firm||Death or insolvency of proprietor dissolves the business|
|Foreign Ownership||Allowed||Not Allowed||Allowed||Allowed||Not Allowed|
|Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route||Member, nominee and director must be an Indian resident||Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route||Nnon Resident Indian (NRI) can be a partner in the Partnership Firm, subject to RBI regulations||Foreign Nationals cannot own proprietorship business in India|
|Lower rate of 25% for companies with gross turnover of INR 400 Crore. Additional dividend distribution tax may apply||Same as Private Limited Company||Tax rate of 30% on business profits, tax benefits to partners on profit distribution is high||Same as LLP||Tax rates for individuals apply to Proprietorship Firm, as per the Income Tax slab|
|Private company has the highest compliance requirements, both annual and event based||OPC compliance requirements are similar to PLC, except conducting an Annual General Meeting (AGM)||Annual filing and few event based filings are necessary, but lesser compliance requirements as compared to company structure||ITR of partnership needs to be filed annually, no major compliance requirements otherwise||No requirement to file a separate ITR. Very less to no compliance hassle|
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