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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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.

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