How to Register Sole Proprietorship Firm in India?

By Trademark Bazaar - 8th September 2017

How to Register Sole Proprietorship Firm in India?

Procedure to Register Sole Proprietorship Firm in India with required documents and legal procedure and fees.

Sole Proprietorship is the oldest and the simplest form of business entity. This type of company is owned and managed by the individual making him the sole authority to take all kind of decisions regarding the operations of the organization. Further, the taxation and accounting procedure in this form of company is much easier than other forms of companies.

Benefits of Sole Proprietorship Firm Registration

Various benefits of registering a sole proprietorship firm are as follows-

1. Ease in formation- The process of registration of sole proprietorship firm is comparatively very simple as compared to other forms of businesses. Also, very little paper work is required in this process.

2. Taxation- a sole proprietorship gets a tax benefit as he is not required to file a separate business tax return and all income generated from the business is reported on the personal tax form.

3.Distribution of profits- The sole proprietor is the sole owner of the business thus he is not required to split the profits of his business and he can enjoy the benefit of retaining the whole profits of the business.

4. Decision Making- In this form of business entity the sole power to make quick decisions rests in the hands of the sole owner thus the time consumption in the process of decision making will drastically reduce. 

Documents required for Sole Proprietorship Firm 

Following documents are required for registering a sole proprietorship firm-

1.    Copy of your PAN card.

2.    Address proof in your name, such as passport, voter ID, or utility bills.

3.    Your passport sized photographs.

4.    Proof of registered address of the business such as telephone or electricity bills.

5.    Bank account statement (for at least 6 months) from the current banker.

6.    Current account details.

 Process of Registration Sole Proprietorship Firm 

In India a sole proprietor firm can be registered in only through opening its bank account or by obtaining licenses required for conducting the business.

Registration through bank Account

RBI KYC norms has mandated that a sole proprietorship firm is required to submit any of the two documents to open a bank account-

1. Certificate/license issued by the Municipal authorities under Shop & Establishment Act,

2. Sales and income tax returns

3. GST certificate

4. Certificate/registration document issued by Sales Tax/Professional Tax authorities

5. License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities,

6. Registration/licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority/ Department, etc.

7. Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of the bank account etc.

8. The complete Income Tax return (not just the acknowledgment) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated/ acknowledged by the Income Tax Authorities.

9. Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern.

Sole Proprietorship Registration through License

Proprietor PAN Card

Obtaining a PAN card is the first step towards registering a sole proprietor firm. The identity of the sole proprietorship businesses and its members are considered to be one and the same. Thus, the PAN card of the proprietor will be used for purposes like opening bank account, obtaining licenses / registrations / certificates in the name of the sole proprietorship and filing income tax return for the sole proprietorship.

Taxation Registration

All the manufacturing and trading businesses are required obtain GST registration for conducting business irrespective of the type of business entity. Thus, to start the business every sole proprietorship firm requires GST registration which can be obtained by using the Proprietor’s PAN Card from the respective state government. The GST registration obtained can be used as a proof of existence for Proprietorship business.

Shop and establishment license

Micro, Small and Medium sized enterprises under the MSMED Act to promote small scale businesses in India. The sole proprietor firm can obtain MSME certificate as a proof of existence.

Further, Shop & Establishment Act License can also be used as a proof of existence for sole proprietorship firm. This license is required for businesses that operate a store or factory or formal place of business. Shop & Establishment Act license is often provided by the Department of Labor in the State and is required to operate a business in most states. 

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