What is sole proprietorship registration?

• Sole proprietorship firm registration is single owner form of business which can be started only by the individual, proprietorship firm is not considered as separate person, all the registration document and tax compliance are required to complied by using the personal PAN and other KYC documents of the proprietor.
• Proprietor firm is the simplest form of business to start in India, it can be started in a day with no requirement for separate registration.
• Sole proprietorship is an unregistered single owner business as per law, there is no separate procedure for a sole proprietorship firm business, PAN number cannot be applied for proprietorship firm, the PAN of the proprietor is used for proprietorship firm.
• The personal PAN and other KYC documents of the proprietor shall be used to apply for income tax and GST compliance.
•  The answer is you have the option to register Udyam registration for proprietorship firm, which was also called as MSME registration earlier.
• The individual who is the owner of the business is called as the sole proprietor, the proprietor is legally responsible for all the activities of the sole proprietorship firm.

Advantages of sole proprietorship firm registration

Easy to set up : Setting up sole proprietorship is a simple and quick process, sole proprietorship firm is considered as low-cost business set up which does not require complicated documentation or approvals.

Exclusive control : The individual sole proprietor have the complete control over the business operations, decision-making, and overall functions of the business.

Ability to use profits of business : The assets and profits generated in the proprietorship business belongs to proprietor, there is no requirement for distributing profits or other assets to second person.

Minimum Compliance : There is no separate legal compliance for sole proprietorship firm, there is no mandatory regular periodical compliance to retain the proprietorship firm structure. This provides the additional benefit of affordable yearly compliance and maintenance cost.

Privacy over business operations : The critical details of the business such as existence, profitability, operations, ownership is completely disclosed from public, whereas in case of partnership firm, public can get ownership profile of partnership business by application of FORM-A for partnership firm.

Easy closure : Proprietorship firm can be closed easily without any complicated wind up procedures.

Income tax compliance for sole proprietorship firm

Sole proprietorship is considered as predominately preferred business structure by small scale business, therefore more benefits are given under income tax act.

Taxable at slab rates : Income from business or profession of proprietorship business is taxable at slab rates applicable to the individual, it is clubbed with gross total income, so by utilizing income tax rebate U/s 87A business income will be tax-free up to Rs.5,00,000.

Presumptive taxation : The scheme of presumptive taxation U/s 44AD is applicable for proprietorship business for turnover up to Rs.50 lakhs in case of professionals and up to Rs.2 crores in case of other business.

Relaxation in TDS compliance : There is no mandatory compliance required for TDS compliance if the firm is not liable to tax audit, or where scheme of presumptive taxation is opted.

Income tax return filing is not mandatory : Income tax return filing for proprietor are required only if total income crosses basic exemption limit or turnover form business exceeds Rs.60 lakhs or turnover from profession exceeds Rs.10 lakhs in financial year subject to other conditions for exemption from income tax filing.

GST compliance for proprietorship firm

GST registration :  Sole proprietorship business are required to apply GST registration when the turnover exceeds Rs.40 lakhs for exclusive supplier of goods and Rs.20 lakhs for supplier of services. Most of the sole proprietor ship business operates in local area, and there will not be requirement to register GST number on mandatory conditions for most of the proprietor business.

Composition scheme : Proprietorship business can opt to payment of tax under composition scheme if aggregate turnover does not exceed Rs.1.5 crores in previous financial year for manufacturing @ 1 %, trading @ 1 % and for restaurant business @ 5 % as per section 10(1) of CGST Act. For service providers, proprietorship business is eligible if aggregate turnover in previous year does not exceed Rs.50 lakhs.

GST return filing : GST registered proprietorship firm can file periodical returns either on monthly basis or under QRMP scheme where returns are required to be filed on quarterly basis and payment on monthly basis.

Other important registration required for sole proprietorship firm

Import export code registration : Application for IE code registration is applicable if the proprietorship firm is engaged in import or export business. IE code is required to be applied even for service provider, inward or outward payments will not be processed by banks without import export code registration.

Food safety registration : Food safety registration or licence is required to be applied if the business is engaged in processing, manufacturing, trading, distribution of food products. Food safety basic registration or state licence shall be applied based on the type of food business, turnover etc.

Trade mark registration : The name of the proprietorship business is not a registered brand name, application of Udyam registration is only a proof that the business existed from the mentioned date. Trademark application is required to be filed for registration of brand name, trademark registration protects the brand name from competitors in misusing the unique business name.

Practical reasons to register sole proprietorship registration

1. When your business doesn’t have any risk of high third-party claims, in case of high risk business it is recommended to register private limited company for the benefit of limited liability.
2. When the expected turnover from the business is moderate, tax benefits will be beneficial for the proprietorship firm.
3. Proprietorship form of registration is suitable for all unorganized sector, business which does not require organizational structure, business that requires no employees or minimum no of employees. e.g : standalone retail outlets, provision stores, small and medium trading business etc.
4. Where business is started as a temporary option, it is recommended to register sole proprietorship business for easy of setup and closure.
5. In some type of business specifically in case of the majority of service sector, the orders and customers are primarily dependent on the talent of the proprietor, in that case the business structure is just a medium to comply for tax laws and business laws. For these types of business proprietorship is most preferred e.g. : media artist, professionals, consulting business, doctors, lawyers, freelancers etc.