A vast portion of the India is composed of rural and semi unban areas, where many individuals manage and run small businesses. And with this significant number of small-scale business, the government came up with the sole proprietorship business model.
Sole proprietorship is one of the oldest business structures in India. As the name suggests, it is a type of business that is managed and owned by only one person – the proprietor. It is also among the easiest to start in India because of the minimal compliance requirements.
If you are an owner of a small business in India, you need to register for a sole proprietorship to avail yourself of the government benefits and comply with the laws. But how do you start with sole proprietorship registration in India? What are the requirements? Before we explain the process, let us discuss the basics.
Who Is the Sole Proprietor?
Also called a sole trader, a sole proprietor is the owner of the proprietorship business. This person will create a bank account for the business and register for GST using his/her PAN and Aadhar information. He/she is responsible for the entire liabilities and assets of the business.
Although there are more business-related responsibilities for the sole proprietor, the good thing is that there is no profit-sharing. This means the sole trader keeps the profits to himself.
The Advantages of the Sole Proprietorship Model
Many perks come with sole proprietorship registration in India. Below are some of them:
Advantage #1: Registration is not compulsory.
Sole proprietors are not forced to register their businesses. But if their businesses carry out activities that need registration according to the MSME Act or GST Act, then registration is mandatory.
Advantage #2: Capital requirements are minimal.
Normally, there is less capital requirement in case of a sole proprietorship, and it all depends on the nature of the business.
Advantage #3: There is limited compliance.
As per the Companies Act, 2013, both public and private limited companies are regulated. But unlike these business structures, there is limited compliance when registering for a sole proprietorship.
Advantage #4: There is no profit sharing.
Another significant advantage of starting this business structure is that there is no sharing of profits. The sole proprietor enjoys the business entity’s profits.
A Checklist of Documents Required for Sole Proprietorship Registration
Below are some of the documents that may be required to operate as a sole trader:
- PAN and Aadhar card of the sole proprietor
- Utility bill with the business address
- Copy of bank statement and other information such as account number and IFSC code
- GST registration, if required
- Photograph of the sole proprietor and authorized signatory
The Sole Proprietorship Registration Process in India
In this section, let us look at the process involved in sole proprietorship registration in India:
Step 1: Choose the name.
First, choose a unique name for your sole proprietorship. The name should abide by the intellectual property laws of the country. Also, it must not be offensive.
Step 2: Select a location for carrying out business operations.
Next, select a place where you want your business to operate and be established. This is important since you will have to register with local and relevant authorities, such as the Shops and Establishments Act.
Step 3: Register under the MSMED.
Sole traders are also required to register under the MSMED to proceed with business operations. This registration, also called Udyog Aadhar, will help secure your name. Also, it is required to stay compliant with the laws.
Step 4: Get your TAN.
You must obtain your Tax Deduction Account number or TAN from the Income Tax Authority if it is applicable to you.
Step 5: Register for GST.
If your business turnover exceeds a certain amount, then you may be required to register for GST as per the Good and Services Tax Act of 2017. This turnover will relate to your business’s annual turnover. If you offer services and your annual turnover exceeds more than Rs. 20 Lakh, then GST registration is mandatory. The same goes for trading businesses that have an annual turnover that exceeds more than Rs. 40 Lakh.
Step 6: Register for IEC.
Import-export code registration is required if you are exporting goods outside the country. It has to be registered under the Director General of Foreign Trade.
Step 7: Register with the FSSAI.
This is only required if you are carrying out operations that are associated with the packaging or manufacturing food products. This is also necessary if the business handles food-related items.
Hassle-Free Sole Proprietorship Registration in India
This is only required if you are carrying out operations that are associated with the packaging or manufacturing food products. This is also necessary if the business handles food-related items.
