SATax Consultancy

Tax Consultant

WhatsApp

A Sole Proprietorship form of business organisation is where a business is managed by a single person. Generally, it does not require any registration as such. Any individual who wants to start a business with less investment can choose this type of business form. The control of the business is solely in the hands of the single proprietor/owner. A single person who wants to start a business from home or on a premise with a minimum amount can opt for this form of business type. The investment for the sole proprietorship business will be done by the single proprietor. He bears all the losses of the business and enjoys all the profits. He controls the business as well as manages it. He can appoint persons for conducting the business, but the ownership will rest solely with him. Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as a sole proprietorship firm. Even small traders and manufacturers can establish a sole proprietorship firm.

Any person who wants to start a business with less investment can opt for this type of business form. It can be started in a time span of 10-15 days. Also, the control in the business is solely in your hands.

Less compliances

The sole proprietorship business can be started easily by just one person. There is minimum compliance that is required to be adhered to get it incorporated. This form of business is economical as it is relatively less expensive to start than a company or LLP.

Control of the business

The sole proprietor will have complete control over the business. He will look after all the aspects of the business. Since only one person is running the business, secrecy can be maintained.

Quick decision making

The sole proprietor takes all decisions of the business. The decision making rests with a single person. Thus, the decisions can be taken quickly and immediately without the need for consulting anyone.

Unlimited liability There is an unlimited liability on the sole proprietor. He is personally liable for all the transactions he enters in the business. If any loss occurs, he will have to bear the whole loss out of his personal estate.
No perpetual succession There is no perpetual succession which means it can come to an end if something happens to the sole person taking care of the business. It can shut down at any time. This makes the business unreliable and difficult to gain public trust for entering into agreements or contracts to expand the business.
Difficult to raise funds Since a single person manages the business, it is not easy to raise capital. The capital of the business is from the investments put in by the sole proprietor. The sole proprietorship firm has no separate legal entity status from the owner. As it can come to an end at any time and there is no separate entity, it is difficult to obtain funds from third parties.

The procedure for incorporating a sole proprietorship firm is-

Applying for PAN card.
After obtaining a PAN card, or if the proprietor already has a PAN card, the next step is to keep a name for the sole proprietorship business.
The next step is to open a bank account in the name of the business. All the transactions of the business will be through this bank account.
Though no specific registration is required for starting a sole proprietorship firm, certain basic registrations are required to be obtained by a sole proprietorship firm for doing business. The basic registrations required by a sole proprietorship are-

• The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.
• The sole proprietorship should also register for GST if the business turnover exceeds Rs.20 lakh.
• The sole proprietorship can also register as a Small and Medium Enterprise (SME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.