Our Services : Proprietorship

Please visit us or call us +91 86085 50000 / +91 93614 41414 or mail us at audit@auditorsindia.me to incorporate a Proprietorship firm.

There are different kinds of business structures:

1. Sole Proprietorship
2. Partnership
3. Hindu Undivided Family
4. Limited Liability Partnership
5. Private limited company
6. Public limited company
7. Cooperative Societies

An entrepreneur needs to be careful while choosing between different types of business structures. The form of business structure influences the growth and success of the entity and also determines power, control, risk, responsibility and taxation of the enterprise and the entrepreneur.

It is advisable to get a proper consultation from a professional expert preferably a Chartered Accountant in practice.

What is a Sole Proprietorship?

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business.

A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as M/s XYZ Traders. The fictitious name is simply a trade name and it does not create a legal entity separate from the sole proprietor owner.

Thus, a sole trader or proprietor is a person responsible for providing the capital, bearing the risk and management of business.

Characteristics of Sole Proprietorship

  1. Easy of Formation;
    Under Sole Proprietorship, there is no separate procedure for the registration of business. Similarly, the closure of sole proprietorship business takes place if the business owner decides to close the business himself or dies.There are almost no legal formalities to form or operate a sole proprietorship type of business. No separate registration is needed for such a business entity. However, a sole proprietor may obtain a license under any of the government enactments as per the nature of his business.
  2. Unlimited Liability:
    The liability of a sole proprietor is unlimited. This means that the owner is personally responsible for the payment of debts in case the assets of the business are not sufficient to meet such debts.
  3. Single Ownership:
    A single individual owns a sole proprietorship form of business. As a result, he is the sole bearer of all the risk of the business.

The acts under which a sole proprietor can register include:

Proprietorship Formation:

There is no specific registration requirement for proprietorship business.

However, registration with Goods and Services Tax (GST for Proprietorship Firm) and obtaining PAN and TAN number for complying with the related provisions of the Income Tax Act is necessary. MSME is also desirable

Bankers normally insists for KYC documents in the name of the firm to open a Current Bank Account in the name of Proprietorship Firm.

Apart from registration of a business there are various other registrations which are mandatory in nature or desirable for smooth functioning of the business some of these are as under Mandatory Registration Applicable to all Businesses in India

Permanent Account Number (PAN):
Income tax department allots an account number to all those persons who are required to pay tax or to file a tax return or annual information report (AIR). This number is permanent in nature and need to be quoted on all the tax returns, tax payments challans, any correspondence with the income tax department. This number is an alphanumeric number of 10 digits which is allotted only once to a person.

TDS Number (TAN):
While making payments to suppliers, vendors, service providers, employees the tax needs to be deducted at source which is also known as TDS. Tan no. is a permanent identification number, allotted to those persons who are liable to deduct tax at source. Applicable to all Businesses in India

Shops and Establishment Registration:
Every shop and establishment needs to register itself compulsorily under this Act within 30 days of commencement of work. As this is such a basic license, many other licenses require this as proof of a commercial business. For example, most banks will require you to furnish it if you want to open a current account. To get this license, you would need to provide the PAN card of the business owner or the business itself, a copy of the rental agreement or sale deed, and details of all the employees. Premises governed by the Act are shops, commercial establishments, residential hotels, clubs, restaurants, eating houses, theaters and other places of public amusement or entertainment etc. except those who falls under Factories Act 1948.

Professional Tax Registration:
It is a tax on profession in India and is levied by State Governments on every professionals or employees of a private sector.

Import Export Code :
A person which wish to deal in international trade by way of import or export need to register with the director general of foreign trade and obtain IE Code.

GST Registration:
A person may not be able to supply goods or services all over India unless GST Registration is obtained, However for same state supply the limit is 40 Lac

MSME Registration:
Udyog Aadhar enables an entrepreneur to seek online services offered by Government Departments apart from various other benefits under MSME.

Food License / FSSAI Registration:
If you are engaged in a business of manufacturing, trading, storing or dealing in any manner of food items, then the state level FSSAI registration or Central License is mandatory based on the turnover.

Drug License:
Wholesale or Retail Drug License is location-based and is granted by the State Government based on fulfilling certain norms and criteria. No entity can start or continue sale/trade of Drugs without drug license.

Private Security Agency License:
Private Security Agency is a lucrative business with immense potential, however, it can be started or continued only after obtaining a license from the competent authority as designated by the state government.

Other Registrations:

Other registrations like provident fund registration can be obtained once the number of employees reaches 20, However optional registration with PF Department can be obtained even prior to reaching 20 employee on voluntary basis. Employee State Insurance Corporation (ESIC) registration and compliance thereof is mandatory after the number of employee reaches 10 in number. Drug license is needed in case the business is about dealing with scheduled drugs, food (FSSAI) registration is required if the business is relating to food.

What are the documents required for Registration under various acts?

Identity Proof of the Proprietor:


PAN Card, Driving Licence, Passport, ID cards issued central and state govt, Passbook scheduled commercial bank, Voters ID card, Aadhar Card.

Address Proof of Proprietor:

Driving Licence, Passport, ID cards issued by the Central and the State govt., Passbook scheduled commercial bank, Utility Bill, Municipal corporation bill, Credit Card Bill, Bank statements.

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