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  • Sumeet Mahajan

How to Register Proprietorship Firm in India: A Comprehensive Guide




A sole proprietorship business structure is a prevalent business type in India. A sole proprietorship business is founded and operated by a single individual. This business form is best suited for those who want to start a business with a low initial expenditure. In general, there is no need for registration.  

With a small investment, a single proprietorship business can be launched from home or on a commercial property. The lone proprietor/owner who invests in the firm has complete control of the business. He suffers all of the company's losses and reaps all of its earnings. He can designate people to run the firm, but he will retain full ownership.

Sole proprietorship is the simplest form of business in India because it is not governed by any specific law and requires few formalities to establish. A sole proprietorship is a business that is run by just one person. A single individual is in charge of company decision-making and management. However, because the sole proprietor has unlimited liability, he or she must bear the business losses. The paperwork needed to start a sole proprietorship business is very minimal. 

As a sole proprietorship firm, you can develop several local companies such as grocery stores, parlors, boutiques, and retail stores. A sole proprietorship firm can be established by even small traders and producers. Find all about How to register  proprietorship firm in India.


What is meant by Registration of Proprietorship Firm in India?


A proprietorship firm is one that is owned and managed by one person. This type of business may be formed in fifteen days, making it one of the most popular types of businesses to start in the unorganized sector, particularly among merchants and small traders. Registration is not necessary for a proprietorship business because it is identified through other registers, such as GST registrations. However, its liability is boundless, and it does not exist indefinitely.

A proprietorship is a business form or structure that allows for the operation of a business. It obviously refers to a person who owns the entity and is personally liable for its debts.  

A proprietorship, such as Radhe Shyam Groceries, can conduct business under its owner's identity or a fictional name. The fictitious name is only a trade name; it does not form a different legal entity from the sole proprietor. The sole proprietorship, while simple to establish, is not a legal entity. 


Understanding the Concept of Registration of Proprietorship Firms:


A sole proprietorship is a popular business structure because of its simplicity, ease of setup, and low cost. To get a sole owner ready for business, he must register his name and secure municipal permits. 

However, one significant disadvantage is that the owner of a proprietorship is individually liable for all of the company's debts. In addition, if a sole proprietorship runs into financial difficulties, creditors may file claims against the business's owner. If such proceedings are successful, the plaintiff will be forced to pay the company's debts out of his or her own pocket.

Because there is no separate identity under the law for the sole proprietorship, the owner normally signs contracts in his or her own name. Even if the business has a fictional name, the sole proprietor will usually have clients make checks in the owner's name. 


Who is eligible for Registering Proprietorship Firms?

 

This business structure is suitable for anyone who wants to create a business with a low initial cost. It takes about 10-15 days to get started. Furthermore, you have complete control over the firm. 


What are the benefits of Registration of Proprietorship Frim ?


Fewer compliances:  


A sole proprietorship business can be readily founded by one individual. There is a minimum level of compliance that must be met in order for it to be incorporated. This type of business is cost-effective because it is less expensive to establish than a corporation or LLP.

Management of the company: 


The solo proprietor will have complete authority over the company. He will be in charge of all areas of the company. Because the company is operated by a single individual, confidentiality may be preserved. 

Making quick decisions: 


The solo proprietor makes all business choices. The choice is made by a single person. As a result, choices can be made fast and without discussing with anyone. 


What are the disadvantages of Proprietorship Firms? 


Liability is unlimited:  


The solitary proprietor is subject to unlimited liabilities. He is personally liable for all business dealings he enters into. If a loss happens, he must face the entire loss from his personal estate.  

There will be no permanent succession: 


There is no perpetual succession, thus it might come to an end if the lone person in charge of the business dies. It has the ability to shut down at any point. This renders the company untrustworthy and makes it harder to win public trust for entering into agreements or contracts to build the firm.

Fundraising is difficult: 


Raising finance is difficult because the company is run by a single individual. The sole proprietor invests in the business and provides the funds. The owner is the lone legal entity of the sole proprietorship firm. It is difficult to get funding from third parties because it can terminate at any point and there is no separate company. 


How to register Proprietorship Firm in India?


With us, you can know how to register proprietorship firm in India in a few easy steps.

 

Procedure for incorporating a sole proprietorship firm in India:

  • Applying for PAN card.

  • The next step is to keep a name for the sole proprietorship business after acquiring a PAN card, or if the proprietor already has a PAN card. 

  • The following step is to open a bank account in the name of the company. This bank account will be used for all company transactions. 

Though no special registration is required to launch a sole proprietorship firm, a sole proprietorship firm must get several basic registrations in order to conduct business. A sole proprietorship is necessary to have the following basic registrations:

  • The proprietor must get a Registration Certificate in accordance with the Shops and Establishment Act of the state in where the business is located. 

  • If the business revenue reaches Rs.20 lakh, the single proprietorship must additionally file for GST. 

  • The sole proprietorship can also register as a Small and Medium Enterprise (SME) under the MSME Act; while this is not required, it is advantageous.

Documents Required for Registration of Proprietorship firm in India : 


  • Aadhaar card

  • PAN card

  • Registered office proof

  • Bank account

  • Address proof of the place of business

  • Rental agreement or sale deed  (in case of Shops & Establishment Act Registration)


Checklist of Registration of Proprietorship Firm.


We have mentioned below a detailed checklist for how to register proprietorship firm in India:


  • A certificate or license granted by municipal authorities in accordance with the Shop and Establishment Act.

  • The Certificate of Practice, which is granted by the Institute of Chartered Accountants of India, is a license issued by registering authorities. 

  • The Central Government or a State Government Authority/Department, for example, issues the registration/licensing paperwork in the name of the private firm. 

  • Banks may also accept the IEC code (Importer Exporter Code) issued by the DGFT office to a proprietary firm as an identity document for opening a bank account, etc.

  • Complete Income Tax return online (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated and acknowledged by the Income Tax Authorities

  • Utility bills in the name of the proprietary firm, such as power, water, and landline telephone bills  

  • Issue of GST Registration/Certificate. 

What are the required compliances after Proprietorship Registration?  


The following are some of the compliance requirements that needs to done after registration of proprietorship firms in India:  

Filing Individual Income Tax Returns:


The proprietorship's business owner must file a personal income tax return using form ITR-3 or ITR-4. 

Revenue of a business:


Only the income tax forms ITR-3 and ITR-4 allow for the declaration of business income. As a result, all proprietorships must file forms ITR-3 or ITR-4 to comply with income tax regulations. 

GST Return Submission:


If a sole proprietorship is registered for GST, a GST return must be filed each month and every three months in accordance with the registration plan. 


TDS Returns: 


If the proprietorship has workers or spends more than a certain amount on goods and services, the tax must be withheld at the source and TDS forms must be filed quarterly.


Timelines for registering proprietorship firm : 


After completing the procedure of how to register Proprietorship firm in India the Proprietorship firm owner needs to open bank account in the name of the business, take a Certificate of Registration under the individual state's Shop and Establishment Act, and apple for GST Registration. The registration process takes about 10 days, depending on departmental approval and reverts from the corresponding department. 


How we Facilitate Registration of Proprietorship firm?  


Professional Advice:


Our professionals provide professional advice on many of the processes involved in registering your firm as a sole proprietorship, including service tax, sales tax, import/export code, and professional tax registration. 

Relationship with a Vendor:


Our team will put you in touch with a reputable vendor who will book your application and keep you informed of its status and development. The vendors we have on board are experienced and skilled at managing native registrations.  

Results in 15 Working Days:


Our team will provide complete registration support. Depending on the task at hand for the authorities concerned, this could range between 5 and 15 days


FAQs on Proprietorship Registration  Services


Question: Who is eligible to form a sole proprietorship?


Answer: A sole proprietorship can be established by any Indian citizen who has a current account in the name of his or her firm. Depending on the sort of business to be founded, registration may or may not be required. Banks, on the other hand, normally demand a Shops & Establishments Registration in order to open a current account. 

Question: What types of enterprises are typically run as sole proprietorships?


Answer: From grocery stores to fast-food vendors, and even small traders and manufacturers, the majority of local businesses are conducted as single proprietorships. That is not to suggest that larger corporations cannot operate as single proprietorships; they certainly can! Jewellery stores are run by solo proprietors, but this is not advised.

Question: Is an LLP less expensive to run than a private limited company?


Answer: Yes, running an LLP is far less expensive than running a private limited business. Mostly because compliances, such as audits, apply to LLPs only if their turnover reaches a certain threshold. In its first year, most LLPs spend around half as much as private limited firms on registrations and compliance. 

Question: How long does it take to establish a sole proprietorship business?


Answer: A sole proprietorship business can be established and operational in less than 15 days. Because of its simplicity, it is popular among small sellers and merchants. Of course, it's also far less expensive. This is another reason it is the most commonly utilized corporate structure. 

Question: Is there any certificate of Incorporation?


Answer: No, there is no certificate of Incorporation given.

Question: How long does the sole proprietorship exist?


Answer: The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business. 

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