Sole Proprietorship

What is a sole proprietorship?

In India, a proprietorship is an unregistered business entity owned, managed, and controlled by a single individual. Micro and small companies in the unorganised sector choose to register as sole proprietorships. Starting a single proprietorship is extremely simple because there are minimal regulatory requirements for running company. Proprietorship registration is suitable for entrepreneurs who are just starting out in company and have a limited number of clients. The liability of sole proprietorships is restricted, and their existence is not indefinite.

What is the definition of a sole proprietor?

A sole proprietor is the owner of a sole proprietorship and is treated as a separate legal entity from the business. Because the lone proprietor is the business’s owner, he is entitled to all of the company’s profits. The owner has total authority over a solo proprietorship. As a result, he is in charge of the company’s choices. Some licences and licences are necessary to operate a business as a lone proprietor. The type of licence required will be determined by the industry, state, and location.

Documents required for sole proprietorship registration in India

What documents are required to register a sole proprietorship in India?

The registration of a proprietorship in India can be done online. All that is required of you is to provide the following documents:

          1)Identity Proof of the applicant – Aadhar and the PAN Card.

          2)Address Proof of the applicant – Latest Bank Statement

          3) Passport size photos.

With approximately 5-7 working days, SRCC can assist you in forming a single proprietorship in India.

Procedure for obtaining proprietorship registration
How to register a sole proprietorship in India?

In India, forming a sole proprietorship is simple if all of the legal requirements are satisfied.

  • Choose an appropriate business name.
  • A proper business site should be chosen as the venue to do business.
Shops and establishment registration

The Shop and Establishment licence applies to all types of businesses, including shops, restaurants, commercial establishments, retail trade/business, profit-making organisations, and public amusements. It is important to register any business, regardless of whether it is fully operational or not. This licence is issued by the local municipal corporation and is based on the number of employees in a business.

GST registration

Many indirect taxes, including as service tax, value added tax, central sales tax, excise charges, and extra customs duties, have been replaced by GST. GST registration is needed for individuals who make interstate supplies of goods and services and have an annual turnover of more than Rs.40 lakh.

Obtaining a GST registration establishes the company as a lawful seller of services or commodities. Small firms can also take advantage of the composition system, which lowers tax rates. This has resulted in a considerable reduction in taxation and compliance costs. GST registration is required for certain types of companies. If a firm operates without a GST registration, fines apply, according to the GST Act.

Udyog Aadhar Registration

Micro, small, and medium-sized enterprises in India are eligible for Udyog Aadhar registration under the Micro, Small, and Medium Enterprise Development Act, 2006.

The procedure of getting the Udyog Aadhar registration, formerly known as MSME registration, is entirely online. The following are the main goals of the Udyog Aadhar registrations:

  • To allow micro, small, and medium-sized businesses to compete effectively in international markets;
  • To effectively address the issues of unemployment and poverty by promoting the establishment of micro, small, and medium companies on a wide scale.
  • To provide SSI units with the advantages of different government programmes in one place.
  • To protect small businesses against financial exploitation at the hands of large corporations.
TAN Registration

The Tax Deduction Collection Number, or TAN, is a ten-digit number that must be provided by anybody who is responsible for paying tax deductions at source, or TDS, on behalf of the government.

The individual who deducts tax at the source must deposit it with the central government and provide the TAN number.

Salaried workers are exempt from obtaining a TAN or deducting tax at the source. When making certain payments, such as wages, payments to the contractor or subcontractors, or amounts of rent over Rs.180,000/- per year, a proprietorship firm and other entities must deduct tax at the source. After deducting the TDS, the TAN-registered business will provide a TDS certificate as proof of tax collection.

FSSAI Registration

If the proprietor is involved in the sale or handling of food items, an FSSAI registration should be acquired in his name from the Food Safety and Standard Authority of India.

The following is a list of documents that must be submitted in order to register with the FSSAI:

  • Photo of the food business operator
  • Ration card, voter ID card, Pan card, driving licence, passport, Aadhar card, Senior Citizen Card, Department Issued ID are all examples of identity verification documents.

Supporting Documents (if any): NOC from the Municipality or Panchayat, NOC from the Health Department.

Checklist for obtaining Sole proprietorship registration
  • The local authorities issue a certificate under the shop and establishment Act.
  • The Certificate of Practice provided by the Institute of Chartered Accountants of India is an example of a licence issued by the registration authority.
  • The federal government, the state government body, or the department issues the registration or licence document in the name of the private business.
  • The entire tax return in the name of the single proprietor, with the firm’s income officially certified and accepted by the Internal Revenue Service.
  • Utility bills in the name of the proprietary company, such as power, water, and landline telephone bills.
  • The GST registration or certificate is issued.
What are the advantages of forming a sole proprietorship?

There are a variety of reasons why a proprietorship business should be registered. Here are a few examples:

  • Complete Control: – A sole proprietorship is a business that is owned and run by a single individual. Because there are no partners to discuss, the owner has complete authority and may make all choices.
  • Easy Setup: – A proprietorship may simply establish and collect payments from clients because no registrations are necessary to get started.
  • Easy Compliance: – In most situations, the Proprietorship has a substantial benefit in that it does not need any further compliance.

The Proprietor’s PAN and the Proprietorship’s PAN are the same. 

As a result, in most situations, just ITR3 income tax returns are required to be filed each year.

  • Dissolution: – If a person must close his business, he does not need to do it in a big way. This, without a doubt, saves time.
  • Requires less investment: – In India, forming a sole proprietorship involves relatively little money. As a result, anyone looking to establish a firm on a shoestring budget can choose for a proprietorship because no capital is required.
  • Information is not disclosed in public- The financial reports of proprietorship businesses are open to the public, much as the financial statements of LLPs.
Post Incorporation compliances for the sole proprietorships

What are the post-incorporation compliances for the sole proprietorship firms?

In India, sole proprietorships are obliged to file income tax returns. As the proprietors and proprietorships are the same, the proprietor and proprietorship must file the same income tax return.

All owners under the age of 60 must submit an ITR if their total income exceeds Rs. 2.5 lakhs, according to the Income Tax Act. If the proprietor is between the ages of 60 and 80, he should only submit an ITR if his income exceeds Rs. 3 lakhs. If the income exceeds Rs. 5 lakhs, proprietors above the age of 80 are required to submit income tax.

We at SRCC have experience filing income tax returns for a variety of small and medium-sized proprietorship businesses all throughout the country. To file your Proprietorship’s Income-tax return, contact an SRCC Tax Expert immediately.

Audit for Proprietorship

If total sales exceed Rs. 1 crore throughout the financial year, a proprietorship business must undergo an audit.

If the total gross earnings during the financial year assessment exceed Rs.50 lakhs, an audit is required in a professional situation.

In addition, if the income claimed is less than the presumed profits and gains under the plan, an audit is needed for every proprietorship business under a presumptive taxation scheme, regardless of turnover.

A practising Chartered Accountant must perform a Proprietorship Audit for income tax purposes.

ITR for Proprietorship Firms

Form ITR-3 or Form ITR-4-Sugam must be filed by proprietorship companies.

ITR-3 form

A proprietor or a Hindu Undivided Family functioning on a proprietary company or profession might submit Form ITR-3.


A proprietor who wishes to pay income tax under the presumptive taxation plan can complete Form ITR-4-Sugam. Presumptive taxation is a type of taxes that assumes a certain profit margin on the entire income of a business or profession in order to make compliance easier for small enterprises.

Filing a Tax Return for a Proprietorship Firm

A proprietorship firm’s income tax return in ITR 3 or ITR V Sugam can be filed electronically or manually, utilising the proprietor’s digital signature.


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