A Proprietorship Firm is wholly owned, managed and controlled by an individual called proprietor. Proprietorship Firm is the easiest way of doing business and have minimal regulatory compliance. Proprietorship Firm Registration needs not to be registered with any specific authority. However, Sole Proprietor can obtain the MSME Registration/ Udyog Aadhaar to avail various benefits available to Micro Small and Medium Enterprises.
For a Proprietorship Firm Registration, there is no need to take separate registration. Moreover, there is no procedure for obtaining name approval as in case of Companies. Also Government has not provided any mechanism to form the proprietorship firm.
Proprietorship firm Registration can be initiated by just obtaining the Trade Licence, MSME Registration or opening a bank account with the firm name. Separate Income Tax PAN is not required in the name of Proprietorship firm. The proprietorship files the Income Tax return with the PAN of the Proprietor. Further, all other registration like Goods and Service Tax (GST) Registration will be in the name of the Proprietor. Hence, in Proprietorship, the Sole Proprietor is personally liable for all acts.
Advantages of Proprietorship Firm:-
1. Ease of Formation
2. Ease to Operate
3. Minimal Compliance
4. Easy to Close
Any Indian citizen with a current account in the name of their business can start a sole proprietorship. There is no statutory registration required. However, depending on the business, different registration may be required. However, to open a current account, banks typically require a Shops & Establishments Registration or MSME Registration / Udyog Aadhaar.
A business can be started within 2 days from sole proprietorship.
Electricity / Water / Telephone Bill / Bank Account Statement of the proposed nominee
PAN Card of Proprietor
Voter Card / Passport / Aadhaar Card / Electricity Bill of Proprietor
Ease of Formation
Starting a sole proprietorship is very simple and cheaper. There is no statutory registration required to form Proprietorship firm.
There is no requirement to file separate Tax return for Proprietorship Firm. The sole Proprietor in liable to file only his / her personal Tax return. Individual tax slabs is applicable to the proprietorship concern.
Proprietorship concern can hire employees and claim the expenses from the business.
The Proprietor is the owner of the Proprietorship. All the control over the business decisions is remains with the proprietor.
A proprietor can borrow secured funds as well as unsecured funds as per his capacity. Generally, Banks check the repayment capacity before approving the amount of loan.