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PROPRITERSHIP FIRM
When you start a business individually without other's partnership then that business can be termed as Sole-proprietorship. And the business person who starts this sole proprietorship is known as the sole proprietor. This business is also termed as a sole proprietorship firm. It is basically a type of unregistered business that is handled by one person. It is used by most of the start-ups and also by most of the small scale business which is operating in India. The tax rate is quite low in a sole proprietorship, hence every start-up runs on a sole-proprietorship basis until they get stabilized and the owners and partners increase.
Some complimentary registrations that you may need for Sole-proprietorship?
1) GST registration: The proprietor should opt for GST registration if he is selling goods or services that cross the GST turnover's threshold value for registration.
2) MSME or Udyog Aadhaar registration
MSME or Udyog Aadhaar registration has to be obtained in business name to establish that sole proprietorship is registered with the Ministry of Micro, Small, and Medium Enterprises. It also adds some added-advantage for running your business smoothly.
3) Other Registrations
Other types of registrations like FSSAI, TAN, IE Code, DS, etc. should be taken into consideration based on the type of service we provide be it importing exporting, or be it the supply of food, etc.
Advantages
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It is up to you how you have to utilize the profit. That is if you want to invest the profit or keep it to yourself for savings. You are your own boss here.
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Since you are the only owner of your firm, hence only you have the right to decide what operations you want to perform. You don't need to take other partners or any third parties' views into consideration.
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In the Proprietorship business, the firm and the proprietor are the same, i.e. the tax slab which is specified for any individual's income is applicable for the income from the business. This tax rate is quite low compared to other business structures.
Disadvantages
You cannot transfer any kind of registration or license that you obtained by you for your sole-proprietorship. This is because in sole-proprietorship the business and the proprietor is considered as the same entity
A proprietorship would not be able to raise equity funds from angel investors, venture capital firms, and banks also.
When you run a business, you would need to look from a different person's perspectives as well. But at times, when the proprietor becomes too over-confident or has to take any sudden decision he won't be getting any views from personnel who have the same stake.
FAQs Section
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No, you can't transfer your proprietorship.
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No, there is no constraint for opening a sole-proprietorship.
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A proprietorship can be started with just 1 person itself.
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Yes, you can convert your proprietorship into a company or LPP. However, this process is time-consuming and costly.
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The person should be an Indian citizen and resident for being a proprietor.
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Based on your services you would require to have additional registrations, for eg. if you are a supplier of food then you would have to take FSSAI registration.
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No, you cannot have any foreign participation in your sole-proprietorship.
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Proprietorship firms do not have a Certificate of Incorporation.
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