What is Sole Proprietorship?
A sole proprietorship is a business entity which is run and managed by an individual. It is a form of business which is suitable particularly for small traders and merchants.
Advantages of a Sole-Proprietorship
- Registration: No mandatory registration is required.
- Easy to Start: A sole proprietorship needs registration with the requisite tax/ licensing authorities depending upon the nature of business/ quantum of transactions thereof.
- Relatively Inexpensive: A Sole Proprietorship is comparatively less expensive to other forms of business.
FAQs on Sole Proprietorship
- Limited capital contribution;
- Unlimited personal liability of the owner/ sole-proprietor, thus, attracts comparatively higher risks;
- Lacks of continuity of business;
- Less Creditworthiness as compared to other business entities;
- Limited management and innovative skills of the proprietor.
- Who can start a sole proprietorship?
Any person residing in India can start a sole proprietorship.
- What documents are required for starting a sole proprietorship and opening a current account in the name of sole proprietorship?
To start a sole proprietorship, a person would need address and identity proofs, PAN card, all KYC documents and rental agreement or sale deed (in case of Shops & Establishment Act Registration).
The documents required for opening a current account may differ from bank to bank as per their internal norms. Generally, a proof of Identity and proof of place of business serves as a valid proof for opening a current account.
- How long does it take to establish a business with Sole Proprietorship?
A sole proprietorship takes the least time to get started as compared to any other forms of business entities. This makes it popular among the small traders and merchants.
- What businesses are commonly run as sole proprietorships?
Most local businesses are run as sole proprietorships. Its scope extends from a grocery store to a fast food vendor, and even to small traders and manufacturers.
- When does a sole proprietorship require registration under VAT & Service Tax?
Any business entity engaged in the activity of sale and purchase of goods or rendering services would require registration and filing of returns under VAT or Service Tax respectively, once the turnover reaches the prescribed threshold limits as notified by the Government from time to time. However, in case of an air-conditioned restaurant, one needs a VAT and Service Tax Registration in case the above threshold limits are reached.
- Can I apply for any of these registrations online?
The registration for Service Tax as controlled by the Central Government can be availed of ‘Online’. Further, the registration facility for VAT as controlled by the State Governments is also mostly available ‘Online’.
- What if I wish to convert from sole proprietorship to private limited company, LLP or partnership?
One can always opt for conversion of a sole proprietorship into a Private Limited Company, LLP or Partnership after following the prescribed procedure under the Companies Act, 2013, Limited Liability Partnership Act, 2008 or the Indian Partnership Act, 1932 as the case may be.
Our Organization will guide you to decide about the registration you need to take and whether service tax, VAT, import/export code, etc. is also required or not, along with the documents related thereto.
Our experts will offer their complete support until you receive the registration you've opted for.