Proprietorship Company Registration

A sole proprietorship is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business and A sole proprietor has complete control over the business.

The sole proprietorship is most common and simplest form of the business. A sole proprietor has complete control over the business and can own the business for any duration of time. An individual proprietor owns and manages the business and is responsible for all transactions.

Advantages of Proprietorship

Easy to Start

A Proprietorship business needs no registration. Therefore, it is one of the easiest to start with no formalities. However, after starting up the Proprietorship, it is relatively harder to open a bank account or obtain a payment gateway in the name of the business - since more registrations may be required.

Business Name

Since the name of a Proprietorship is not registered, a Proprietor- ship can choose to have any name - as long as it does not infringe on a registered trademark. However, since the name is not registered, any other person can also use the same business name unless trademark registration is obtained.

Taxation

A Proprietorship with less than Rs. 2 lakhs of income is not required to pay any income tax, as Proprietorships are taxed as the individual owing the business. However, once, income of the business exceeds Rs. 10 lakhs per annum, there are no major advantages for a Proprietorship in terms of taxation.

Audit NOT Required

A Proprietorship firm is not required to file audited financial statements with the Ministry of Corporate Affairs each year. Therefore, audit of financial statements is not required. However, tax audit may be required for a Proprietorship firm if the turnover exceeds prescribed limits.

Other Advantages of Proprietorship

Full ownership and control, Less capital involved, Profits are not to be distributed, Ease of formation. Complete control over all the aspects of business, Strong Interpersonal relationships with clients, customers and employees.

In the case of proprietorship firm, there is no registration required in India. You simply have to open a bank account with the name & style you want to work. But if your business is liable for VAT and / or Service Tax registration, then you have to obtain VAT and / or Service Tax registration. Further, for sole proprietorship, no separate income tax PAN is required. The PAN of the proprietor will be the PAN of the firm and proprietor will have to file income tax return in his personal name.

Only one person is required to start a Proprietorship and a Proprietorship can have only one promoter.

The Proprietor must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.

PAN Card for the Proprietor along with identity and address proof is sufficient to start a Proprietorship and obtain other registration, as applicable or required.

There is no limit on the minimum capital for starting a Proprietorship. Therefore, a Proprietorship can be started with any amount of minimum capital.

Rajput Jain & Associates Associate will understand your business requirements and help you start a Proprietorship by obtaining the relevant registrations. Rajput Jain &Associates will help obtain the necessary registrations to help the Proprietor open a bank account in the name of the business, thereby proving an identity for the business.

Proprietorship Startup Process

Rajput Jain & Associates can help startup a Proprietorship in 7 to 14 days, subject to Government processing time. Since the proprietorship is itself not distinguishable from its owner hence there is no registration or approval is required to start a proprietorship business. Proprietorships do not have a process of incorporation. Therefore, our Business Advisors will advise you on the way the identity of the Proprietorship business can be established through other Government registrations.

Other need based Registrations required as per other statute: - The Proprietorship firm may be required to get themselves registered into various other departments like excise, customs, SSI etc.

Registration under Shops and Establishment Act: This kind of registration is mandated by some of the municipalities and applies to the firms operating in the territorial jurisdiction of the municipality. This is state specific requirement, in some states it is mandatory and in some it is optional, for example in the Delhi NCT it is optional

Sales Tax (VAT) Registration: This is a tax on sale of goods within the state which is governed by the respective vat act of the state.

Central Sales Tax Registration :This is a tax on Sale of goods between the states, which is governed by the central sales tax act

Service Tax Registration: This is a tax on the services provided by the proprietor apart from the negative list of service. The identity of a Proprietorship can be established through Service Tax Registration (if applicable) mentioning the business name. Service tax registration takes 10 to 15 days, subject to Government processing time.

Import Export Code: This is also known as IEC, and is pre-requisite before the proprietorship ventures in to any import or export

Trade Mark Registration :Brand Name, Logo, Slogan, Label etc.; are intellectual properties which acquires value over a period of time and it is advisable to protect them under as trade mark

MSME Registration: The identity of a Proprietorship can be established by MSME Registration (if applicable) mentioning the business name. MSME Registration can be completed in 10 to 15 days, subject to Government processing time.

Provident Fund Registration: The moment number of employees exceeds 20 the proprietor is required to get itself registered with the regional office of the Provident Funds Organization. The contribution rate is 12% each from employee as well as employer

Employee State Insurance Corporation (ESIC) Registration: every organization including the proprietorship concerns employing more than 10 employees having salary more than 15000/- is required to get themselves registered with the concerned Regional office of the ESIC, the contribution to the ESIC is 6.5% wherein 4.75% is contributed by the employer and 1.75% is to be contributed by the employee.

To open a bank account for a Proprietorship, Reserve Bank of India mandates that the proprietor provide two forms of registration for the Proprietorship along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: service tax registration, MSME registration, VAT/TIN/CST registration, shop & establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI Know Your Customer norms.

No, the Proprietorship firm and the Proprietor are one and the same. The PAN Card of the Proprietor will be the PAN Card of the Proprietorship business. Therefore, there will be no separate legal identity for the business. The assets and liabilities of the Proprietorship business and the Proprietor will also be one and the same.

Proprietorship firms do not have a Certificate of Incorporation or Certificate of Registration. The identity and legitimacy of a Proprietorship firm is established by registering with the relevant or applicable Government authorities.

There is no registry or regulation for the registering the name of a Proprietorship. Therefore, proprietorship firms can adopt any name that do not infringe on registered trademarks. Since there is no registry or regulation for registering the name of a Proprietorship, the only way to ensure exclusive use of the business name is to obtain a trademark registration of the business name.

A business operated by proprietorship firm cannot be transferred to another person, unlike a Limited Liability Partnership or a Private Limited Company. Only the assets in the Proprietorship can be transferred to another person through sale. Intangible assets like Government approvals, registrations, etc., cannot be transferred to another person.

Proprietorship firms are business entity that are owned, managed and controlled by one person. So Partners cannot be inducted into a Proprietorship firm.

Proprietorship firms are business entity that are owned, managed and controlled by one person. So Proprietorship firms cannot issue shares or have investors.

Proprietorship will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filign may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.

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 criterion.

Yes, there are procedures for converting your Proprietorship business into a Company or a LLP at a later date. However, the procedures to convert a proprietorship business into a Company or LLP are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider and start a LLP or Company instead of a Proprietorship.

As a sole proprietor, filing of taxes is generally easier than a company. Your individual and business income is considered the same and self-employed tax implications will apply.