Author - Associate Zarmeen Jahan
India is full of people who are operating their business in the form of Sole Proprietorship. People generally start their small businesses by forming a Sole Proprietorship. As the name suggests, it is a business entity formed in the name of a single person. That person owns the business, manages it and controls the various operations. It can simply be formed by any person who wants to start a business without going through various legal formalities. The Sole Proprietor must be a Citizen and Resident of India.
There is no such specific legal registration under any law to set up a Sole Proprietorship. But, one can apply for a few registrations or licenses under various laws to avoid any complicated scenario.
These are some of the registrations/licenses that may be opted by the Sole Proprietor:
1. Registration under the Shop and Establishment Act– It is required by the local laws prevailing in the area where Sole Proprietorship is located
2. Registration under the MSMED (Micro, Small and Medium Enterprises Development) Act– It is required in case of Micro, Small and Medium Enterprises.
3. Registration under GST (Goods and Service Tax)– It is required in case the turnover of the business exceeds the specified limit. The limit is ₹ 40 lakhs for a supplier of goods and ₹ 20 lakhs for service providers (limit is ₹ 20 lakhs and ₹ 10 lakhs, respectively for specified States).
4. Trademark Registration– It is required in case you want to trade your products or services with an exclusive name or brand. It is beneficial where there is a threat of some misuse of the name used in your business.
5. Licenses or Certificates required according to the nature of business– Like:
Some of the basic documents required to apply for the above registrations/ licenses are:
1. Aadhar Card of the Proprietor– It is mandatory everywhere in India. It can be used as Identity proof as well as Address proof.
2. PAN Card of the Proprietor– It is a mandatory thing if you want to file Income Tax Returns. Also, now linking of PAN with Aadhar is a must for filing Income tax returns.
3. Address proof of Place of Business– the Electricity bill, Water bill, etc. can be used as address proof if you own the place of business. If not, then Rent Agreement along with a NOC (Non-Objection Certificate) will be required additionally.
A Current Account is required to be opened in the name of the Sole Proprietorship (i.e., business name), to carry out financial transactions related to proprietorship concern. RBI has prescribed some KYC (Know Your Customer) norms for opening the bank account which provides a list of the following documents:
(i) Registration certificates or licenses obtained from various departments as discussed above;
(ii) Identity proof of Sole Proprietor (Permanent Account Number [PAN] of the proprietor is a mandatory requirement here). Other identity proof includes Passport, Aadhar, Driving license, etc.
(iii) Address Proof of Sole Proprietor which includes Aadhar, Electricity bill, Water bill, Bank statement, etc.
It's anything but difficult to begin an independent company by framing a Sole Proprietorship with insignificant complexities. On account of lesser complexities, the sole owner can concentrate on upgrading his/her business as opposed to concentrating on meeting different compliances. It's a decent choice for the individuals who need to give a stage to their business thought and evaluate something they need to with the insignificant venture.
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