Sole proprietorships, despite their numerous benefits like direct incentives, full autonomy in decision-making, flexibility, and cost-effectiveness, encounter several challenges. These include unlimited liability, the absence of perpetual existence, non-transferability of the business, funding constraints etc. Above that registering proprietorship concern has also many complexities such as legal formalities, maneuvering through government regulations and paperwork, identifying appropriate licenses, and comprehending the application process—particularly in regulated industries, Understanding tax obligations, meeting filing requirements, and ensuring compliance with tax regulations can also pose complexities.
A sole proprietorship is a business solely owned and operated by a single individual. It can be established and operational within a span of 10 days, making it highly favored in the unorganized sector, especially among small-scale traders and merchants. Requirements for registration starts from finding a name to the business. A sole-proprietor can operate business in his name (ex- Manikchand) or under a trade or firm name (ex: Kalpatharu Enterprises or Mahalaxmi and co), . One can choose the name of their choice. He shall check the availability of name in MCA website & choose a distinct name. A sole proprietor has the flexibility to operate as a franchisee, assume the role of a owner, or function as an independent contractor, also known as a freelancer. He needs to open a bank account (Current Account) in the name of the entity.
Documents such as ID proof, Address proof , entity address proof are mandatory. The owner and entity must share the same PAN, as there is no need for them to have distinct PANs. While filing income tax return, one has to use Mr……., sole proprietor of M/s ………… concern. Also it is worth noting that The income tax slab applicable to Individual tax payers is applicable to proprietary concerns. There are no separate tax rates applicable to proprietorships.
Unlike other business structures, there is no specific registration for sole proprietorships; instead, their recognition is tied to an entity registration under below authorities.
GST Registration: Goods and Services Tax (GST) registration is a mandatory process for businesses whose aggregate turnover crosses Rs. 40 Lacs in a financial year.
Registration under Karnataka Shops and Establishment Act Secure a Shops and Establishment License from the relevant local municipal corporation or panchayat, based on the specific location of your business.
Profession Tax Registration: Enrollment for professional tax (Employee) becomes obligatory for businesses within 30 days of hiring staff and for professionals within 30 days of initiating their practice. The deduction of professional tax is required from the salary or wages disbursed.
MSME/Udyog Aadhaar Registration: you may consider registering your sole proprietorship as a micro, small, or medium enterprise (MSME) to avail of certain benefits like lower interest loans schemes provided by the government.
Employee Provident Fund Registration: “Provident Fund,” which is a savings scheme and social security program established by the Indian government to provide financial security and retirement benefits to employees. All establishments with 20 or more employees need to compulsorily register itself with the Employees’ Provident Fund Organisation (EPFO).
Employee State Insurance Registration : Employees’ State Insurance Scheme of India is a Social Security Scheme tailored to provide Socio-economic protection to the ’employees’ in the organised sector. This is provided in the events of illness, maternity, disablement and death during employment and in providing medical care to the insured employees and their families. Under Section 2A with regulation 10-B of the ESI Act, it is the statutory responsibility of the employer to register their Enterprice under the Employees State Insurance Act within 15 days from the date of its applicability.
Import Export Code (IEC): Any individual or entity involved in import or export activities in India needs to obtain an IEC. It is mandatory to have an IEC to clear customs and to send or receive goods across international borders. The application for an IEC is submitted to the Directorate General of Foreign Trade (DGFT) through an online portal.
Trade License from BBMP : Acquire a Trade License from the Bruhat Bengaluru Mahanagara Palike (BBMP) to legally operate your business within the jurisdiction of Bangalore.
Thus, the registration process of proprietorship concern involves legal formalities and compliance with various regulations. Understanding these legal aspects can be challenging for individuals without a legal background. Consider seeking professional assistance from chartered accountants, company secretaries, or legal experts to ensure accurate and timely completion of the registration process. BCL India are a team of Professionals who expertise is with the process and can expedite the registration, saving you time and effort. This allows you to focus on other aspects of setting up and running your business.
