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Sole Proprietor

Sole proprietorship business is easiest form of business model to start in India as it can be managed and owned by single person. Sole proprietorship has less compliance requirements, and it is very easy to start. In this business form there is less paperwork compared to other forms of business.

Being a sole proprietorship model of business, one cannot have shareholders and partners. Sole proprietor liability is not limited to the extent of his business. This business model is generally suitable to small scale operations having less than ten employees.

Who is a sole proprietor?

A sole proprietor is the one owns or manage day to day operations and can be also called owner of the proprietorship firm. A sole proprietorship is the easiest and most regular form to start a business. One is required to have PAN and Aadhar card to take GST certificate and open the current bank account to run the operations.

How to check proprietorship status?

In India, there is no direct platform for sole proprietorship to check the status, but we have another option to check by getting the GSTIN of the sole proprietorship

 

if a proprietor has applied for GST registration. One can check the filling status of the proprietorship on the GST Portal and accordingly existence of the proprietorship can be confirmed.

Proprietorship legal entity status and recognition

In sole proprietorship there is only one legal entity and there is no separate recognition. Hence for all the legal and official purposes the proprietorship is considered same. In sole proprietor the total control and full decision-making power on policies, profits and capital investment. are taken by its owner without interference of others.

Sole Proprietorship Registrations & Licenses

For the registration of sole proprietorship, one should obtain PAN card and valid government recognized ID proofs such as (passport, voter id, aadhar card etc..) we also need bank statements or a cancelled cheque and also need copy of electricity bill, mobile bill. It also need GST Registration and MSME (Micro Small Medium Enterprises)registration and opening a bank current bank account. We can get additional license depending on the industry, state and also depends on the industry specific requirements depends on the business of the proprietorship

Advantages of Proprietorship

Easy registration: As we know sole proprietorship is run by the single person it doesn’t need much paperwork. So the registration and running cost is less compared to other forms of business. However, there will be certain formalities that should be carried out by the proprietor like registration and other licenses to run the entity

Lower compliance: There is Lower compliances in proprietorship because this type of entity can be registered only by government through Income Tax & GST registration so there will no high compliance compared to LLP or the companies which are registered with Ministry (MCA) they should file various statutory returns.

Simplicity: As this type of business are handled by proprietor himself and operate the organization smoothly with less number of employees. In this type of business structure, the involvement of other persons like directors, shareholders are zero so owner himself will take all decisions. All the above factors make it simple and easy for very small businesses.

Business decision: As sole proprietorship business is owned by single person, so the proprietor himself will take all the business decisions without the approval required from others. By this one can take the best and fast decisions regarding his business affairs.

Complete control: As sole proprietorship is managed by single person. Due to the sole owner in the business one will have complete control over the business debts and in other factors.

Disadvantages of Sole Proprietorship

Funding: As this is a sole trader business structure owned by single person it will be difficult for him to raise the funds from banks. In this type of business there will be no other person for funding in business. Raising funds will be limited for running the business operations

Personal liability: In this type of business structure if the proprietor is unable to clear his business loans and taxes in his losses, proprietor should meet his liabilities. It is a significant factor because if need occurs one should use his personal assets for relieving liabilities.

Business continuity: As this is a sole proprietorship owned and managed by single person due to continuous loses or owner’s sudden death in such cases business will be closed. So, there will be no continuity in the business.

Growth: As a Sole proprietorship model of business there will be certain restrictions regarding liabilities, funding, business continuity as a result it effects in growth in business .so it will be suitable for only small business

Unincorporated business: Unincorporated business does not possess separate legal entity by the owner for all its liabilities and this is same with the sole proprietorship. There is no proper data base in the govt recognized portals so these entities are also called as unorganized business.