What is a proprietorship?
A sole proprietorship is a form of business which is individually owned by a person. It is also known as a single trader or just proprietorship. This is a type of business entity in which there is the only single owner who starts a business with an objective to earn a profit. As there is only single owner all the profit and the losses are borne by him only. When it comes to liability the sole proprietor has an unlimited liability that means he is liable to pay the debts and the losses of the company.
Proprietorships are simple to start and have minimal regulatory compliance requirements for operating. This entity is ideal for entrepreneurs who are getting into business for the first time and for small businesses with few clients.
Who is a Proprietor?
A proprietor is an individual who owns a business establishment or sole proprietorship.
This person has legal use of the assets and their operations. The proprietor and the proprietorship are considered to be the same entity legally.
The following key registration which proprietorship concern should obtain at the time of start of business:-
- Trade License/Gumasta
Trade license/Gumasta is a registration required for doing any kind business. This registration is obtain from the state government. This license is basic requirement for opening bank account and obtaining other registration.
- MSME Registration
MSME or Udyog Aadhaar registration can be obtained in the name of the business to establish that the sole proprietorship is registered with the Ministry of Micro, Small and Medium Enterprises.
- TAN Registration
TAN registration must be obtained for the proprietor from the income tax department if the proprietor is making salary payments and any other payments on which TDS deduction is required.
- GST Registration
GST registration must be obtained if the proprietorship concern engages in manufacturing of goods, trading of goods or providing services to its clients.
The threshold limit for registration is decided by central government from time to time. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders – annual revenue of more than Rs.40 lakhs.
- Import Export code
Import Export Code or IE code can be obtained from the DGFT in the name of the business – in case of a proprietorship business undertaking export and/or import of goods into India.
- FSSAI Registration
In case the proprietorship is involved in the selling of food products or handling of food products, FSSAI registration must be obtained from the Food Safety and Standard Authority of India in the name of the proprietor.
Documents required to start a proprietorship
- PAN Card of the proprietor
- Address Proof of proprietor
- Address proof of principal place of business
Legal Compliance requirement for Proprietor
The proprietorship concern will have to file income tax return with income tax department. Also quarterly TDS return needs to be filled if TDS has been deducted on specified payment
The proprietorship concern will have to file GST returns with GST department on monthly.
It is not necessary for proprietorships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criteria
How we can help you?
We will help you to obtain key registration and also to comply with various legal requirement.