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A Sole Proprietorship is a simple and convenient way to start a business in India. In this type of business, there is no legal distinction between the owner and the business. A Sole Proprietorship is the simplest form of business entity in India, owned and managed by a single individual. It is the easiest way to register and commence business operations. Since it is not governed by any specific law, it remains one of the most straightforward forms of business in India. All decisions and management responsibilities rest solely with the owner.

A sole proprietor is the owner of a sole proprietorship and is recognized as the same entity as the business. As the sole proprietor, the individual is entitled to all the revenue generated by the business. The business is entirely under the proprietor’s control, giving them full authority to make all decisions.

To operate a business as a sole proprietor, certain licenses and permits are required. These depend on the industry, state, and locality.

In India, a proprietorship is an unregistered business entity owned, managed, and controlled by a single individual. This structure is preferred by micro and small businesses operating in the unorganized sector. Starting a sole proprietorship in India is straightforward, as it involves minimal regulatory compliance. It is an ideal option for entrepreneurs launching small businesses with a limited client base. However, the liability of a sole proprietorship is unlimited, and it does not have perpetual existence.

Post incorporation of your sole proprietorship firm, you’ll receive the following documents:

GST Registration Certificate

Shop and Establishment Act License
MSME Certificate

The total fees for registering a Sole Proprietorship Firm in India is ₹1999, inclusive of government and professional charges. This cost primarily covers the mandatory registrations required for the existence of a proprietorship firm, such as GST registration, MSME registration, and more.

GST Registration

MSME Registration

Shop and Establishment Act License

Shop and Establishment Act License

GST Registration : As per business requirements and GST regulations, an application for GST registration must be submitted to the department. The GST registration process typically takes around 5-10 working days.

MSME Registration: To establish the existence of your proprietorship firm and access various benefits, you need to register your firm as a Small and Medium Enterprise (SME) under the MSME Act. This registration is particularly advantageous when applying for loans, as the government offers several schemes that provide loans to SMEs at reduced interest rates.

Shop and Establishment Act License >: Obtaining a Shop and Establishment License is mandatory as per local laws. This license, issued by the municipal corporation, is based on the number of employees or workers in the firm.

Bank Account Opening : After completing all the necessary steps, the proprietorship firm should open a current bank account. Feel free to contact us for assistance with the account opening process.

Starting a sole proprietorship in India is easy if all the compliances are properly met.

Decide on the suitable business name

The Shop and Establishment License applies to all types of business entities, including shops, restaurants, commercial establishments, retail businesses, profit-making organizations, and public amusements. Registration is mandatory for every business establishment, regardless of whether it is fully operational or not. This license is issued by the local municipal corporation and is based on the number of employees in the establishment.

GST has replaced various indirect taxes, including service tax, value-added tax (VAT), central sales tax, excise duties, and additional customs duties. Any individual engaged in the interstate supply of goods and services or having an annual turnover exceeding ₹40 lakh is required to obtain GST registration.

Registering for GST provides legal recognition to a business as a supplier of goods or services. Small businesses can also opt for the Composition Scheme, which offers lower tax rates and significantly reduces the tax and compliance burden.

Under the GST Act, certain businesses are mandatorily required to register for GST. Operating without GST registration can attract penalties, making it crucial for businesses to comply with this regulation.

Udyog Aadhaar Registration is granted to micro, small, and medium-sized businesses in India under the Micro, Small, and Medium Enterprises Development Act, 2006. Previously known as MSME registration, the process for obtaining Udyog Aadhaar registration is entirely online.

The primary objectives of Udyog Aadhaar registration are as follows:

• To enable micro, small, and medium enterprises to compete efficiently in the international market.
• To promote the growth of MSMEs on a large scale, addressing unemployment and poverty effectively.
• To provide SSI units with seamless access to various government schemes.
• To protect small-scale industries from financial exploitation by larger industries.

TAN (Tax Deduction and Collection Account Number) is a mandatory ten-digit alphanumeric identifier required for all entities responsible for deducting Tax Deducted at Source (TDS) on behalf of the government. Entities with TAN must quote the number when depositing the deducted tax to the central government.

Salaried individuals are not required to obtain TAN or deduct tax at the source. However, proprietorship businesses and other entities must deduct TDS for specific payments, such as salaries, payments to contractors or subcontractors, and rent exceeding ₹1,80,000 per year. Upon deducting TDS, entities with TAN registration issue a TDS certificate as proof of tax collection.

FSSAI Registration must be obtained from the Food Safety and Standards Authority of India (FSSAI) in the proprietor’s name if they are involved in the selling or handling of food products. Click here to learn more about who needs FSSAI registration.

Here is a list of documents required for FSSAI registration:

Document for Identity proof like Ration card, the Voter ID card, Pan Card, Driving License, Passport, Aadhar Card, Senior Citizen Card, Department Issued ID.

Supporting Documents (if any):-NOC by the Municipality or the Panchayat, Health NOC.

Trademark Registration :- Is essential if you intend to trade your goods or services under a unique name or brand. It is particularly beneficial when there is a risk of misuse or infringement of the name or mark associated with your business.

Minimal Compliances : A proprietorship firm has minimal compliance requirements, making it a more preferable option compared to a One Person Company.

Easy to Start :
Sole Proprietorship is not governed by any law and does not require any mandatory registration. Hence, it is the easiest way of starting a business entity.
Lower cost :
As there are minimal compliance, there is no need to hire an auditor for meeting the legal compliance requirements.
Complete control :A proprietorship firm is owned by a single individual, giving them complete control over business decisions without any external interference.

No Sharing of Earned Profits : The sole proprietor solely manages and operates the entire business, retaining 100% of the profits. Notably, no one else is entitled to a share in the profits earned.
Minimum Legal Compliances :It is important to note that sole proprietorships are not governed by any specific law, which naturally minimizes their legal compliance requirements. They are not required to obtain a Certificate of Incorporation or Registration Certificate from any authority. Instead, their compliance obligations depend on the licenses or registrations they acquire.

For instance, a sole proprietorship must file GST returns if it is registered under GST law or comply with any other applicable regulations. However, there is no requirement to upload an Annual Report or other filings on the Ministry of Corporate Affairs website.
Minimum Income Tax :It is important to note that sole proprietorships are not governed by any specific law, which naturally minimizes their legal compliance requirements. They are not required to obtain a Certificate of Incorporation or Registration Certificate from any authority. Instead, their compliance obligations depend on the licenses or registrations they acquire.

For instance, a sole proprietorship must file GST returns if it is registered under GST law or comply with any other applicable regulations. However, there is no requirement to upload an Annual Report or other filings on the Ministry of Corporate Affairs website.

Information Remains In Private Hand:Unlike Limited Liability Partnerships (LLPs) and companies, where audit reports and financial statements are made publicly accessible through the Ministry of Corporate Affairs (MCA) portal, the financial records of a sole proprietorship remain private. Additionally, the government does not maintain a publicly accessible list of sole proprietorships.

Own Decision Making :A sole proprietorship is managed and operated solely by one individual, eliminating any possibility of conflicts in ideas or decisions. The sole proprietor has the exclusive right to make decisions they believe are best for the business.

No Requirement For Audit :A sole proprietorship is not legally obligated to have its accounts audited every financial year. However, the requirement for an audit depends on the nature of the business and the specified turnover thresholds applicable to the firm.