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WHAT IS PROPRIETORSHIP FIRM ?
A sole proprietorship is a business that is owned, managed and controlled by one person.
It is one of the most common forms of business in India, used by small businesses operating in the unorganized sectors.
Proprietorships are very easy to start and have very minimal regulatory compliance requirement for getting started.
However, after the startup phase, proprietorship's do not offer the promoter a host of other benefits such as limited liability, separate legal entity, independent existence, transferability, etc., which are desirable features for any business.
Therefore, proprietorships are suited for unorganized, small businesses that will have a limited existence.
KEY POINTS ON PROPRIETORSHIP BUSINESS
NO REGISTRATION REQUIRED EASY TO START
Proprietorship business cannot be registered as there is no provision of registering it in India. Hence you can start immediately with few basic registration such as MSME-Udyog Aadhar, Shop Act, GST, FSSAI, IEC, Trademark etc.
NO REGISTERED 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.
However, since the name is not registered, any other person can also use the same business name unless trademark registration is obtained.
TAX AS PER INDIVIDUAL SLAB RATE
The business income of the proprietorship is included in the ITR of the proprietor & taxed as per individual slab.
If income of proprietor crosses 10 Lakhs in a financial year taxation will be @ 30%, whereas, in Private Limited taxation is @ 25%.
Unlike a company or LLP, a proprietorship cannot enjoy some of the tax deductions, which could potentially increase the tax liability.
EASY TO CLOSE
The Proprietor and the proprietorship are one and the same for all legal purposes. Hence, there is no formality for winding up or closing a proprietorship. In most cases, to close a proprietorship, only the tax & other registrations obtained in the name of the proprietor must be cancelled.
LIMITED ACCESS TO FUND FOR BUSINESS EXPANSION
Proprietorship has limited access to fund, fund can be contributed by proprietor himself or can raise loan from Bank.
Proprietor cannot approach investor for fund. No FDI is allowed in Proprietorship business.
The liability of Proprietor is unlimited. In a case of default, banks/creditors can sell business assets & personal assets of proprietor.
DOCUMENTS FOR REGISTRATION OF PROPRIETORSHIP
There is no mechanism provided by the Government of India for the registration or incorporation of a Proprietorship.
You may opt for following registration to register your Proprietorship Firm
MSME Udyam Aadhar
FSSAI Registration & License
Import Export Code
Shop ACT Registration
We can help you establish an identity for your Proprietorship by obtaining the relevant registrations.