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Proprietorship

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Proprietorship Registration

A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person. Sole proprietorship’s are one of the most common forms of business in India, used by most micro and small businesses operating in the unorganised sectors. Proprietorships are very easy to start and have very minimal regulatory compliance requirement for started and operating. However, after the startup phase, proprietorship’s do not offer the promoter a host of benefits such as limited liability proprietorship, corporate status, separate legal entity, independent existence, transferability, perpetual existence – which are desirable features for any business. Therefore, proprietorship registration is suited only for unorganised, small businesses that will remain small and/or have a limited period of existence.

There is no mechanism provided by the Government of India for the registration of a Proprietorship. Therefore, the existence of a proprietorship must be established through tax registrations and other business registrations that a business is required to have as per the rules and regulations. For instance, VAT or Service Tax or GST Registration can be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship. Thus, all the registrations for a proprietorship would be in the name of the Proprietor, making the Proprietor personally liable for all the liabilities of the Proprietorship.

FCPA is the market leader in company registration services in India, offering a variety of company registration like private limited company registration, one person company registration, Nidhi Company Registration, Section 8 Company Registration , Producer Company Registration and Indian Subsidiary registration. The average time taken to complete a proprietorship registration is 3 – 5 working days, subject to government processing time and client document submission. Get a free consultation for proprietorship registration and business setup in India by scheduling an appointment with an IndiaFilings Advisor.

Reasons to Register a Proprietorship Firm

Easy to Start

Proprietorship needs minimal registration.Therefore,it is one of the easiest form of business entity to start with minimal formalities.However,after starting up a Proprietorship,it is relatively harder to open a bank account.since more registrations like VAT or Service Tax or GST Registration may be required.

Business Name

Since the name of a proprietorship is not registered,a proprietorship 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.

Single Promoter

Proprietorship is the only type of business entity company that can be registered and operated by one person. To register a one person company, a nominee Director is required and for all other types of entities like company or LLP or partnership firm, two or more promoters are required.

Lower Taxes

Proprietorship with less than Rs. 3 lakhs of income is not required to pay any income tax, as proprietorship’s are taxed as the individual owing the business. However, unlike a company or LLP, a proprietorship cannot enjoy some of the tax deductions tax liability.

Easy to Close

The Proprietor and the proprietorship are one and the same for all legal purposes. Hence, there is no formality for winding up or closing a proprietorship. In most cases, only the tax registrations can be obtained in the name of the proprietor must be cancelled.

Documents Required for Proprietorship Registration
Identity and Address Proof

Identity and address proof will be required for all directors and shareholders of the company to be incorporated. In case of Indian nationals, PAN is mandatory. For foreign nationals, apostilled or notarised copy of passport must be submitted mandatorily. All documents submitted must be valid. Residence proof documents like bank statement or electricity bill must be less than 2 months old.

Registered Office Proof

All companies must have a registered office in India. To prove access to the registered office, a recent copy of the electricity bill or property tax receipt or water bill must be submitted. Along with the utility bill, rental agreement or sale deed and a letter from the landlord with his/her consent to use the office as a registered office of a company must be submitted.

Proprietorship Registration FAQs
  1. 1
    How many people are required to start a Proprietorship?

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

  2. 2
    What are the requirements to be a Proprietor?

    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.

  3. 3
    What are the documents required to start a Proprietorship?

    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.

  4. 4
    What is the capital required to start a Proprietorship?

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

  5. 5
    How will IndiaFilings help me start a Proprietorship?

    An FCPA Associate will understand your business requirements and help you start a Proprietorship by obtaining the relevant registrations. FCPA 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.

  6. 6
    How to open a bank account for a Proprietorship?

    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.

  7. 7
    Will my Proprietorship firm have a separate legal identity?

    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.

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