Proprietorship
About Proprietorship
Sole proprietorship is one of the oldest and easiest Business Structure to start in India. A proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements.
As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small businesses with no more than 5 employees.
Comfile can assist you in registering for a Sole proprietorship, a simple and efficient business structure that is ideal for solo entrepreneurs. With our expert guidance and streamlined process, you can start your proprietorship firm registration online quickly and hassle-free. Start your Sole Proprietorship registration with us and unlock the potential of your business ideas.
Advantages of a Proprietorship
Easy registration:
Sole proprietorship registration does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
Lower compliance:
As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
Simplicity:
As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
Business decision:
In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
Complete control:
As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.
Disadvantages of Sole Proprietorship
Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for profit sharing or shareholding.
Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.
Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.
Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.
Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship registration is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.
Choose the perfect plan
Rs. 1798/-
BASIC
- Proprietorship registration with TAN registration, MSME , GST registration, Payment Gateway.
Rs. 2798/-
STANDARD
- Proprietorship registration with TAN registration, MSME , GST registration, payment gateway, Digital signature certificate.
Rs. 5198/-
premium
- Proprietorship registration with TAN registration, MSME , GST registration, Payment Gateway, Digital Signature Certificate, 1 Yr. TDS Filing
Proprietorship Business Activities
A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, and telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, the proprietorship business structure only works for business activities that are small-scale in nature. This might be one of the limitations of the proprietorship firm registration.
Compliances for Proprietorship
The following are some of the compliances that are applicable for a sole proprietorship registration:
Income Tax Filing: The business owner of a proprietorship will have to file a personal income tax return using the form ITR-3 or ITR-4.
Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.
GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.
TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.
In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.