Proprietorship Firm
Proprietorship in India is a type of unregistered business entity that is owned, managed, and controlled by one person. The micro and small businesses that are operating in the unorganized sector prefer registering as a proprietorship in India. It is very easy to start a sole proprietorship in India as it has very few regulatory compliances for conducting businesses.
Proprietorship registration is ideal for the entrepreneurs who are getting into the business for small businesses with very few clients. The liability of the sole proprietorships is limited and they also do not have perpetual existence.
Proprietorship Firm
Proprietorship Firm Details
Advantages of Proprietorship Firm
- Easy to Incorporate -A Proprietorship business needs no registration. Therefore, it is one of the easiest to start with no formalities.
- Business Name - Since the name of a Proprietorship is not registered, a Proprietorship can choose to have any name - as long as it does not infringe on a registered trademark.
- Taxation - A Proprietorship with less than Rs. 2 lakhs of income is not required to pay any income tax, as Proprietorships are taxed as the individual owing the business.
Disadvanatges of Proprietorship Firm
- Small Size - By its very nature, proprietary concerns cannot grow big. They have limited means. They cannot expand operations in a big way.
- Limited Shelf Life - You never know when a big Mall will come nearby and kill all small players. Small businesses have limited life spans.
- Lacks Professional Skills and Talent - The proprietor lacks professional skills, talent and expertise. He has limited knowledge and does not have the ability to gauze competition, changes in fashions and customer tastes and preferences, trends in economy etc.
- Unlimited Liability - The liabilities of a firm might eat away the accumulated wealth of the owner almost instantaneously. The risk of unlimited liability forces many a sole proprietor not to expand operations beyond a point.
Procedure for Registering a Partnership Firm
- Applying for PAN card.
- After obtaining a PAN card, or if the proprietor already has a PAN card, the next step is to keep a name for the sole proprietorship business.
- The next step is to open a bank account in the name of the business. All the transactions of the business will be through this bank account.
- Though no specific registration is required for starting a sole proprietorship firm, certain basic registrations are required to be obtained by a sole proprietorship firm for doing business.
- The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.
- The sole proprietorship should also register for GST if the business turnover exceeds Rs.20 lakh.
- The sole proprietorship can also register as a Small and Medium Enterprise (SME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.
Documents Required for Proprietorship Company Formation
- Aadhaar Card
- PAN Card
- Registered Office proof
- Bank Account