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Overview

A sole proprietorship is a small and independent business owned and managed by a single individual. It is one of the easiest businesses to maintain. A proprietor is the owner of the Sole Proprietorship business. It is not a corporate or legal entity. The proprietor and the Proprietorship are the same legal entity. Generally, it does not require any registration as such. Any individual who wants to start a business with less investment can choose this type of business form.

Who is a Sole Proprietor?

A proprietor is the owner of the Sole Proprietorship business. It is not a corporate or legal entity. The proprietor and the Proprietorship are the same legal entity.

The PAN and other documents of the proprietor are the basis for obtaining all the registration and licenses. The proprietor will be held personally liable in case of any liabilities in a business.

Procedure for Registration of Sole Proprietorship

The procedure for incorporating a sole proprietorship firm is-

  1. Applying for PAN card.
  2. 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.
  3. 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.
  4. 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 basic registrations required by a sole proprietorship are-
    • 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 Sole Proprietorship

The documents required for registration of Sole Proprietorship are-

  1. Aadhaar Card.
  2. PAN Card.
  3. Registered Office proof.
  4. Bank Account.

Opening a Bank Account

Opening a bank account in the name of the proprietorship firm is one of the first steps after opening a proprietorship. To open a bank account in the name of the proprietorship, two of the following documents are required as per the RBI’s Know Your Customer (KYC) norms:

  • Certificate/license issued by the Municipal authorities under Shop & Establishment Act,
  • GST Registration Certificate
  • Registration / licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority / Department.
  • IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of a bank account.
  • A license issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.

File Returns

Like LLPs and private limited companies registered in India, proprietorships must file income tax returns. As the proprietor and the proprietorships are the same, the Proprietorship and the proprietor's income tax return filing would be the same.

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