What is a Sole Proprietorship Firm?
A sole proprietorship firm is a business that is owned and managed by a single person. You could have one up and running within 4 days. There is no such direct registration for proprietorships it is done by way of other registrations, such as GST registration or MSME registration. It is an extremely popular option amongst various small scale traders and merchants. The disadvantages of a sole proprietorship firm are that it does not have a separate legal entity from its owner, liability of the owner is unlimited and it does not have continuous existence.
Advantages of a Partnership
Very Easy to Start
A sole proprietorship takes about 4 days to register. Since there is no separate legal entity the owner quotes his own PAN wherever required.
Very Less Compliance
It can be started and recognized by taking a tax registration or government registration. Compliance is limited to the tax registrations taken and the yearly income tax return of the owner of the proprietorship.
A sole proprietorship is cheaper to start than as compared to a One Person Company. This is why, despite its severe shortcoming i.e. unlimited liability, small traders may opt for it.
Documents Required for Partnership Registration
- Scanned Copy of Pan card
- Scanned Copy of Aadhaar Card/Voter’s Id/ Passport.
- Scanned copy of Passport sized photograph
- Cancelled cheque of a savings account of the owner.
|Sole Proprietorship||Limited Liability Partnership||One Person Company||Private Limited Company||General Partnership Firm|
|Recommended For||Small manufacturers & traders||Professional services firms||Solo promoters||Start-ups and growing companies||Home businesses|
|Ease of Accommodating Investment||Impossible||Possible, but unlikely||Possible, but severely unlikely||Very easy to accommodate||Almost impossible|
|Limited Liability Protection||No||Yes||Yes||Yes||No|
|Tax Advantages||Minimal||Most efficient||Few benefits||Few benefits||Minimal|
|Know More »||Know More »||Know More »||Know More »||Know More »|
Who can start a sole proprietorship firm?
Any Indian citizen can start a sole proprietorship with a current account in the name of their business. However, to open a current account, banks typically require a tax or government registration of some kind.
What documents are needed for opening a current account in the name of my sole proprietorship?
To open a current account, you need proof of the existence of your business i.e. a government or tax registration. In addition, you will need a PAN card and address and identity proofs of the owner of such firm.
How long does it take to set up a business as a Sole Proprietorship firm?
A sole proprietorship takes about 4 days to be open-up and get running. This simplicity makes it popular among the small traders.
Aside from a current account, is there a need for any other registration?
This depends on the business you’re in. If you’re running a departmental store, then you would also need a GST Registration once your turnover is over Rs. 20 lakh per annum.
What if I wish to convert from sole proprietorship firm to private limited company or partnership firm?
You can always convert to a private limited company or partership. The procedure is a little tedious and expensive but it is possible. It is always recommended to go with the option most suitable keeping in mind the long term vision.