Sole Proprietorship Registration in India

Introduction

Sole proprietorship Registration in India is among the oldest yet most common business structures in India. In the past few years, the Indian start-up ecosystem has grown manifold, giving rise to innovative start-ups offering revolutionary products and services. However, among all the business structures in India, sole proprietorship firm registration seems to be one of the most preferred choices among budding entrepreneurs. With a strong hold over business decisions without any partner, simple procedures, and flexibility to run a business, sole proprietorship business allow them to learn the nuances of growing a business by starting on a smaller level. If you are a first-time entrepreneur looking to start a business of your own, continue reading to learn more about the proprietorship registration process in India, eligibility, benefits, documents required, fees, and time involved. Contact Bizfoc today for making your registration journey hussle-free under the assistance of expert guidance.

What is Sole Proprietorship Registration

A sole proprietor registration has one person who exercises complete control over its functioning and could exist as long as its sole owner exists. Sole Proprietorship Firm Registration in India is one of the most common forms of business which is adopted by many business owners who run retail shops, traders, wholesalers, MSME manufacturers, etc. Sole proprietorship is the most affordable and less compliance-intensive compared to other forms of business registrations.

Benefits of Sole Proprietorship Registration

Simple process of registration:

• Unlike the incorporation process of other entities like an LLP or a registered company, a sole proprietorship firm may register itself using any one or more of the methods available.
• Although it is not compulsory to register a sole proprietorship firm, registration affords it a legal identity and protection for its trademark.

Flexibility to conduct business operations:

• A sole proprietorship firm only contains a sole owner without any other members or partners.
• The sole owner is privileged to hold entire control over business decision-making and adapt it flexibly in different circumstances.

Minimal Capital Requirement:

• Dissimilar to entities like companies and LLPs, where the legal regulations prescribe a minimum capital to start and run the business, it is much easier to start a sole proprietorship firm as there is no fixed minimum capital specified.

Minimal Compliance:

• Sole proprietorship firms get their legal identity through various government licenses and tax registrations, with compliance restricted to annual filings, professional or sales tax, etc., which naturally reduces the regulatory burden.

Complete Financial Control:

• The sole owner of the proprietorship firm enjoys total control over the business finances, which he can optimize to gain maximum revenues.
• It allows him to keep all profits to himself without having to share them with any other partner or member.

Eligibility Criteria for Sole Proprietorship Firm Registration

Any individual desiring to start a business of his own could set up a sole proprietorship firm in India, provided these eligibility conditions are satisfied before the initiation of the registration process:

• Such a natural person shall be over eighteen years of age and have the legal capacity to enter into a contract.
• Such person shall hold valid Indian citizenship with permanent residential status in India only.
• The sole proprietorship firm so registered shall be for a legal purpose and not for any illegal objective.
• The business name should be chosen as per the aims and objectives of the business. However, it is to be kept in mind that the business should not be registered already or too similar to an existing business.

Required Documents for Sole Proprietorship Firm Registration

1. Self-attested PAN of the sole proprietor;
2. Bank details of the proprietary concern;
3. Recent passport-size photos of the sole proprietor;
4. Copy of necessary licences obtained by the sole proprietor i.e. MSME registration/Shop and Establishment Act licence/trade licence (where applicable);
5. PAN and Aadhaar details of the sole proprietor of the proprietorship concern;
6. Documents like Voter ID or Utility Bills (electricity/water) for verification of registered place of business;

Sole Proprietorship Firm Registration Online Process

Under the Shop and Establishment Act

Step 1: Identify whether the sole proprietorship firm comes under the definition of Shops or Establishment

Firstly, to seek sole proprietorship registration under the State Shops and Establishment Act, you will need to find out whether the nature of your business falls under either the category of a shop or an establishment. While the term shops includes places or locations,

• Where either goods or services, or both, are offered to the public directly for consumption purposes; or
• Attached or related places to the area where goods or services are being offered, for instance, warehouses, rented office spaces, sheds, etc., whether they are situated on the same premises or not.

On the other hand, the term establishment encompasses locations such as factories, hotels, restaurants, confectionaries, etc., or public entertainment avenues of similar nature.

Step 2: Submit an application for Registration to the State Labor Department

The applicant seeking sole proprietorship registration under the Shops and Establishment Act needs to submit an application requesting business registration along with details such as his name and name of the business, registered place of business, date of initiation, employees’ details, etc., along with the prescribed fees, to the State Labor Department office within not more than 30 days of the commencement of the business.

Step 3: Review of Application and Grant of License

The verifying authority will scrutinise the application and the attachments and may issue a registration certificate upon finding the application proper and complete in all respects. After obtaining registration, the sole proprietor shall display the certificate on the business premises and renew the licence at regular intervals.

Udyog Aadhar Registration under MSME Portal

Step 1: Start with User Registration on the MSME Portal

Go to the MSME portal to initiate the user registration process. Start putting the information required such as the name of the business owner and contact details registered as per his Aadhaar records. Click Validate and fill in the one-time generated password received through the portal to complete the authentication process.

Step 2: Complete user authentication through the PAN of the sole proprietor

Next, fill in details such as the name of the business and the PAN of the sole proprietor, and then click Validate after which again a time password will have to be submitted.

Step 3: Log in to Fill the New User Registration Form

Now, put other essential information such as registered office address, category of goods or services proposed to be manufactured or procured to customers, total investments, bank account number of the business, etc., and upload necessary attachments.

Step 4: Form Submission and Receipt of Udyam Certificate Online

Finally, after providing all necessary details, submit the form and one-time password generated once more. Now, an Udyam Aadhar certificate will be issued in a downloadable format.

It is to be noted that obtaining a Udyog Aadhar registration not only affords legal identity to your sole proprietorship concern but also makes it eligible to seek financial assistance under government schemes and avail credit facilities at cheaper rates.

Bank Account in the Name of the Sole Proprietorship Firm

Apart from attaining a sole proprietorship firm through various means as provided above, it is of utmost importance to start a business bank account in the name of the proprietorship concern. Where the sole proprietor doesn’t have GST registration, banks may seek a copy of the ITR returns stating the trade name of the concern.

Proprietorship Firm Registration Fee in India

The government fees for a sole proprietorship can span anywhere from Rs. 500 to Rs. 5,000. Due to the lack of an official process for sole proprietorship registration in India, there cannot be a uniform registration fee to register the concern. Hence, the process of registration and the total cost of registration may vary on a case-by-case basis for every applicant depending upon his business requirements and other factors such as jurisdiction, government, and professional fees for any assistance taken by the applicant.

Time Involved in Sole Proprietorship Firm Registration

Normally, the timeline for sole proprietorship firm registration under the Shops and Establishment Act, MSME Act, or GST Act may differ slightly, subject to document verification by the concerned authorities. However, provided below is a general timeline for sole proprietorship firm registration in India through different ways:

• Shop and Establishments Act: 10–20 days
• MSME Registration: 1 working day
• GST Registration: 7–10 Working Days

Sole-Proprietorship Post-Registration Compliances

Once a sole proprietor acquires registration in India, he is obligated to fulfil all applicable compliances within their due dates every year. The number of compliances applicable may differ for every registered proprietor based on the authorizations or licences acquired, but here are some general compliances applicable for a sole proprietorship firm in India:

• Tax Filing Requirement: If the annual revenue of the sole proprietorship concern surpasses Rs. 2 Crores or more, it shall be mandatory to complete a tax audit and file tax returns accordingly within the due date. Sole proprietors need to deduct TDS and file TDS returns as applicable.
• Maintenance of Books of Account of the Business: If the annual revenue exceeds Rs. 2.5L or Rs. 25L combined in any of the three financial years, the sole proprietor shall be obligated to upkeep proper books of accounts.
• Filing GST Return: Where the annual business revenue exceeds Rs. 20 lakhs, it is mandatory to file GST returns by the sole proprietor.
• Fulfil Labor Law-Related Compliances: If the sole owner falls under the purview of any labour law-related compliances such as safe working conditions, the minimum pay for workers, employees PF or insurance, etc., and submit returns within the due date to avoid penalties.
• Professional Tax Registration: Where the income of a sole proprietorship firm exceeds a certain threshold limit, then the sole owner of a sole proprietorship must make tax payments on their trade. For this, sole owners must obtain a professional tax registration certificate and submit taxes accordingly.

Why choose BizFoc?

At BizFoc, we have a unique team of experts with years of experience to find solutions for all your woes related to sole proprietorship registration under one roof. Our unique features include:

• An expert team of professionals to guide and assist you with end-to-end support from registration to completion of legal processes.
• Round-the-clock presence to hear your concerns.
• Efficient services with reasonable charges in a timely manner.

Conclusion

Therefore, embracing the path of entrepreneurship in India could be a step in the right direction where an individual starts small and learns to grow while learning nuances in the competitive business landscape building the foundation for impending business endeavours. With simple business processes, flexible operations, and an efficient ownership structure, sole proprietorship business registration in India could be beneficial to start small and achieve more with time. If you wish to obtain sole proprietorship registration in India or have any questions regarding the same, connect with expert professionals at BizFoc to guide and assist you.

Frequently Asked Questions