The easiest and best form of business for an individual is sole proprietorship. Whenever an individual decide to start a small business, first thing in his mind is whether all type of business are sole proprietorship? or it requires a joint venture of two or more people. Secondly, how to start a sole proprietorship business.
Here are replies to all of your doubts.
What is sole proprietorship?
Sole Proprietorship is a form of business which do not have separate existence from its owner. The sole proprietorship is not a separate legal entity in itself. It simply refers to a person who owns the business and is personally responsible for its debts.
Advantages of sole trading include that:
- You’re the boss.
- No interference in management
- No sharing of profits.
- No prior statutory registrations (subject to few exceptions).
- Business can be closed easily.
However, there are few disadvantages like:-
- It has an Unlimited Liability,
- No Financing from Venture Capitalist
- Limited Financial Resources in Business,
How you will start your sole proprietorship?
Sole Proprietorship is not governed by any specific law therefore it may be started without any prior registration. However, for smooth running and from long term prospective, it’s advisable for Sole Proprietorship to take registration in :
- GST Registration
- Registering as SME
- Shop and Establishment Act License
- PAN (of Sole Proprietor)
- Open a Bank Account
GST Registration
GST Registration is required where annual turnover is more than Rs. 20 lakhs.
Documents Required
- PAN card, Photo and Aadhar Card of the proprietor
- Proof of business place (Electricity bill/ rent agreement)
GST registration is easy and can be done via the GST portal. Normally GST Certificate is received within 3-4 days of submitting the application.
Registering as SME
Sole Proprietor may register itself as Small and Medium Enterprise (SME) under the MSME Act. The registration under MSME Act is not compulsory and the application for registration as SME is to filed electronically.
The Registration as SME has many benefits like SME has a higher chance of getting loan under schemes run by Government from time to time for SMEs where loans are provided at the concessional rate of interest.
Shop and Establishment Act License
Shop and Establishment License is not mandatory in all states however it may be asked for in the States where it is mandatory.
PAN Card
Sole Proprietor is to take PAN which is mandatory for filing Income Tax Return and at the time of opening of Current Account of Sole Proprietorship the PAN is required. Application for applying PAN may be filed electronically.