Sole Proprietorship Firm Registration

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OVERVIEW

What is a Sole Proprietorship Firm?

Most businesses in India start individually without other’s participation. An individual carrying out business activities is the sole proprietor and its business entity is said to be a Proprietorship Firm. The identity of an individual and the business are not different from each other. But due to the lower tax rate, flexibility and multiple advantages people prefer this structure for the early stage of business.

With the inclusion of partners, the control over operation reduces. Hence, these proprietors choose to run the business single-handedly and land upon sole proprietorship firm registration. Although there is no specific Act to regulate this organization, there are many ways to register a Sole Proprietorship firm. Small businesses aiming to take lower risks prefer this structure.

BENEFITS

Benefits of Proprietorship Firm Registration

You Are Your Own Boss

In a sole proprietorship, the proprietor has all the rights to decide what to do and how to operate. A proprietor neither needs to report someone nor take orders from anyone else. There is no interference from a third party. Unlike a corporate firm, there are minimal compliances or disclosure requirements during the whole financial year. Hence, Government interference is also very less.

Easy To Establish

It is relatively easy to establish and register the sole proprietorship business. There is no specific process to be followed to setup this business. Also the cost of sole proprietorship registration is very less compared to any other business structure. The business runs on the identity of the proprietor himself. He can run any legal business in his own name or with a different legal name as brand.

You Own Whole Share Of Profit

The proprietor is only owner of the business and therefore he owns the whole share of the business profit. Also, the business assets are treated as assets of the proprietor and vice-versa. He can decide when to withdraw profit or to reserve.

Tax Benefits

Proprietorship business is not treated separately in for income tax purpose. The tax slab as specified for an individual’s income is only applicable to the income of the business. The rates of tax are lower compared to other business structure like company and partnership. The benefit of deductions is an added advantage with combined ITR for individual and the business.

ONLINE REGISTRATION

Documents required for registration of Proprietorship Firm

PAN Card

A self-attested copy of PAN Card of proprietor

Aadhar Card

Self- attested copy of Aadhar Card of proprietor

Bank Details

Details of the saving or current account of bank

How to choose a name?

Proprietorship can be recognised with individual name, but business name is preferable that it help building Brand Name

Unique Name

Check for unique sole proprietorship name that helps recognising the proprietorship firm distinctly and build brand value.

Business Object

A part of business name should suggest the business activity so that consumers can easily relate business with its offerings.

Short and Simple

The name should not be unnecessarily long and should be simple enough to spell and remember.

Learn More

Online Registration

Establish Proprietorship in 3 Easy Steps

1. Answer Quick Questions

Pick a Package that best fits your requirements
Fill in our questionnaire that take less than 10 minutes
Provide basic details & documents required for registration
Make payment through secured payment gateways

2. Experts are Here to Help

Assigned Relationship Manager
Preparation and filing of Application
Registration under MSME Department
Firm Seal
Allotment of TAN

3. Your Business is incorporated

All it takes is 4 working days*

*Subject to Government processing time

The Process

Process to register Proprietorship online

Day 1

Business registration consulting
Collection of basic information
Provide Required Documents

Day 2 - 3

Preparation of online application
Online Sole Proprietorship registration
Application for allotment of TAN

Day 4

Dispatch of Firm seal and other materials if subscribed*

Compare Related Services

Compare different business structures to choose the right entity type

	Private Limited Company	One Person Company	Limited Liability Partnership	Partnership Firm	Proprietorship Firm
Applicable Law	Companies Act, 2013	Companies Act, 2013	Limited Liability Partnership Act, 2008	Indian Partnership Act, 1932	No specified Act
Registration	Mandatory	Mandatory	Mandatory	Optional	No
	PLC must be registered with MCA under the Companies Act	Same as Private Limited Company	LLP must be registered with MCA under the LLP Act	Partnerships can be registerd or Unregistered, there are obvious benefits to register with the State ROF	No registration required. Registration under MSME or GST act are considered valid for Proprietor Firms
Number of Owners	2 – 200	Only 1	2 – Unlimited	2 – 50	Only 1
	Minimum of 2 to maximum of 200 shareholders excluding present or former employees who are members	Only one shareholder	Minimum 2 Designated Partners are required. No limit on the number of maximum partners	Minimum 2 partners, and maximum 50 partners	The proprietor can be the only owner of the firm
Separate Legal Entity	Yes	Yes	Yes	No	No
	PLC is a separate legal entity, and can enter into contracts or own assets in it’s own name	Same as Private Limited Comapany	Same as Private Limited Comapany	Partnership firm does not have any separate identity from its partners	Proprietor and business are the same, and hold same PAN number
Liability Protection	Limited	Limited	Limited	Unlimited	Unlimited
	Limited to the share capital subscribed (may vary if defined as limited by guarantee or unlimited liability in the MOA)	Same as Private Limited Company	Limited to the capital contribution agreed by the partner in the LLP Agreement	Partners are jointly and severally liable to pay the debts of the Partnership Firm	Paying off the liabilities of the firm is the proprietor’s responsibility
Statutory Audit	Mandatory	Mandatory	Based On Applicability	Not Mandatory	Not Mandatory
	Required to appoint a statutory auditor within 30 days of company incorporation	Same as Private Limited Company	Statutory audit required when turnover exceeds INR 40 Lac or contribution exceeds INR 25 Lac	No statutory audit required. Tax audit applicable on basis of total turnover	Same as Partnership Firm
Ownership Transferability	Yes	Yes (Restricted)	Yes	Yes (Restricted)	No
	Shares are easily transferable, so it makes it a most preferred option for raising capital through external investors	There is only one owner in OPC. 100% shares need to be tranferred to change ownership	Ownership can be changed with consent of other partners, by drafting a supplementary agreement	Ownership is not easily transferable. Partnership deed outlines the restriction for transfer of ownership	Ownership of the proprietorship is not transferable
Perpetual Existence	Yes	Yes	Yes	No	No
	Private Company prevails with change in ownership or management	OPC has a perpetual succession, but can only have one owner at any time	Change in Partners or Designated Partners does not affect the existence of an LLP	Change in partner leads to dissolution or formation of another partnership firm	Death or insolvency of proprietor dissolves the business
Foreign Ownership	Allowed	Not Allowed	Allowed	Allowed	Not Allowed
	Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route	Member, nominee and director must be an Indian resident	Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route	Nnon Resident Indian (NRI) can be a partner in the Partnership Firm, subject to RBI regulations	Foreign Nationals cannot own proprietorship business in India
Taxability	Moderate	Moderate	High	High	Low
	Lower rate of 25% for companies with gross turnover of INR 400 Crore. Additional dividend distribution tax may apply	Same as Private Limited Company	Tax rate of 30% on business profits, tax benefits to partners on profit distribution is high	Same as LLP	Tax rates for individuals apply to Proprietorship Firm, as per the Income Tax slab
Compliance Requirement	High	High	Moderate	Low	Low
	Private company has the highest compliance requirements, both annual and event based	OPC compliance requirements are similar to PLC, except conducting an Annual General Meeting (AGM)	Annual filing and few event based filings are necessary, but lesser compliance requirements as compared to company structure	ITR of partnership needs to be filed annually, no major compliance requirements otherwise	No requirement to file a separate ITR. Very less to no compliance hassle
	Know More	Know More	Know More	Know More	Get Started

Frequently Asked Questions

Explore Sole Proprietorship Firm Registration – Its formation and registration

2022-06-11T06:56:48+05:30

Does the proprietor have to be an Indian to start a Proprietorship firm?

The Proprietor must be an Indian citizen and a Resident of India. There is no approval required prior to the commencement of business. But, Non-Resident Indians (NRI) and Persons of Indian Origin can invest or start sole their proprietorship business only with prior approval of the Government of India.

2022-06-11T06:56:12+05:30

Under which Government Authority is the application of Sole Proprietorship Firm Registration is submitted?

Sole Proprietorship is an unorganized business structure and there is no specific law enforced for the said registration. LegalWiz.in provides services for Sole Proprietorship registration under MSME (Micro, Small and Medium Establishments) Development Act, 2006 of Central Government. The business entity must fulfill the registration requirement.

2022-06-11T06:55:54+05:30

What is the minimum amount of capital required to register sole proprietorship online?

One can start a Sole Proprietorship Firm with any amount of Capital. An amount sufficient to commence the business should be introduced. As there is no restriction on infusion or withdrawal of amount, the proprietor can change capital anytime. Introducing the capital in Business is the sole decision of an owner of the firm i.e. the Proprietor.

2022-06-11T06:55:25+05:30

How to open a bank account for a Proprietorship?

To open the bank account in the name of Sole Proprietorship Firm, Reserve Bank of India mandates that the proprietor need to 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: MSME registration, GST registration, Registration under Shop & Establishment Act, Professional license, Chartered Accountant certificate or others as provided in the RBI’s Know Your Customer norms or the requirement of the respective Banks.

2022-06-11T06:54:58+05:30

How to register the name of a sole Proprietorship business?

There is no registry or regulation for registering the name of a Sole Proprietorship Firm. Therefore, the name of a sole proprietorship company can adopt any name based on its availability such that it does not infringe on registered trademarks. Since there is no registry or regulation for registering the name of a Proprietorship, the only way to ensure the exclusive use of the business name is to obtain a Trademark Registration of a business name.

2022-06-11T06:54:39+05:30

Will my Proprietorship firm have a separate legal identity or new PAN card after registration?

There is no separate identity of a proprietor or its business even after the sole proprietorship firm is registered. Hence, the PAN card of the firm and the Proprietor is the same. The assets and liabilities for the proprietor and the proprietorship also remain the same.

2022-06-11T06:54:05+05:30

What are the benefits of Proprietorship Firm Registration under MSMED Act?

The registered entity under MSMED Act can avail subsidies, incentives, and schemes launched by the Central Government with respect to the specific Business on the basis of a registration certificate.

2022-06-11T06:53:41+05:30

Who can apply for registration under MSMED Act?

Any business entity can apply for this registration. However, recently, the Central Government has excluded the activities of Trading to be registered under this Act. The business with Trading Activities can apply for registration under Shop & Establishments Act.

2022-06-11T06:53:20+05:30

Can I have partners in a Sole Proprietorship Business?

Characteristics of a Sole Proprietorship Firms is such that it cannot have any other Business Partner as it is owned and controlled by one person itself. If your Business requires the involvement of Partners, you may opt for a Partnership Firm, Private Limited Company, or Limited Liability Partnership, as the case may be.

2022-06-11T06:52:48+05:30

Can other people invest in a Proprietorship?

Sole Proprietorship Business entity is owned, managed and controlled by one person. So, Proprietorship firms cannot issue shares nor have investors.

2022-06-11T06:52:15+05:30

What are the compliance requirements for starting a Sole Proprietorship Firm in India?

Proprietorship will have to file their annual tax return with the Income Tax Department. Other tax filings such as GST returns filing may also be necessary from time to time, based on the business activities performed and registrations opted. However, one needs to file the annual report or accounts with the Ministry of Corporate Affairs, which is required for Limited Liability Proprietorships and Companies.

2022-06-11T06:51:42+05:30

Can I later convert my Proprietorship Business into a Company or LLP?

A proprietorship can be taken over by the company or LLP. However, the procedures for same are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider starting the LLP or Company instead of a Proprietorship after consultation with experts.

2022-06-11T06:51:22+05:30

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