Metiscon Solutions

REGISTER START-UP AS PROPRIETOR

When single person runs a business then such kind of business is called as proprietary business, and the owner of the business is called as proprietor or proprietrix (for a lady). Proprietorship is one of the oldest traditional and most common form of the business setup in India. It can be started with minimum regulatory compliance.

However there is no formal way to register your proprietorship itself by Indian Government. Tax registration and other business registration’s is the right way to show existence of your proprietary business. The following are the most common way of registering a proprietor firm.

  • GST Registration.
  • Shop and Establishment Registration.
  • Professional Tax Registration.

While the owner of a sole proprietorship business typically signs contracts in his or her own name since the sole proprietorship business has no separate identity under the law, GST and other government registrations can be used to open a current account using a business or tradename. However sole proprietorship can have their bank accounts in the name of the owner. Also formalities such as voting and meetings associated with the more complex business forms are not there. For legal remedies sole proprietorships can bring lawsuits (and can be sued) using the name of the sole proprietor owner. This is the simplest form of business which is usually recommended for traders, small manufacturers and service providers and is the most popular form in the small and unorganised sector. You can simply choose a trade name, get the applicable government registration, open a bank account and you are good to go

OTHER RELATED SERVICES

REGISTRATION
GOODS AND
SERVICES TAX

Most businesses choose to register for GST right from the beginning even if it does not apply to them immediately since it has multiple advantages.

REGISTRATION PROFESSIONAL TAX

Has to be done within 30 days of setup. in many states even if there are no employees when the business starts its journey.

REGISTRATION
SHOPS AND ESTABLISHMENTS

A law driven by welfare of workforce almost all businesses fall within the scope of this state law and are required to register within 30 days

REGISTRATION
UDYAM AADHAR
CERTIFICATE

A facilitating legislation for the benefit of Micro Small Medium Enterprises (MSME) this provides access to a host of benefits for the business

DOCUMENTS REQUIRED FOR REGISTRATION

COMPULSORY

  1. Passport size photograph
  2. PAN Card – scan of front and reverse
  3. Aadhaar Card – all 12 digits must be clearly visible

IDENTITY PROOF - any one document

  1. Passport
  2. Driving License
  3. Voter ID

ADDRESS PROOF - any one document

  1. Electricity Bill
  2. Bank Statement
  3. Landline or Broadband bill
  4. Mobile Phone Bill

** (1) Bill should be in the name of proprietor – joint names are acceptable (2) Bill should be less than 60 days old.

DOCUMENT REQUIRED FOR PLACE OF BUSINESS

OWNED BY PROPRIETOR

  1. Electricity Bill OR   Landline Bill   OR Broadband bill   OR Gas Bill
  2. No Objection certificate from owner

** (1) Additional proof of ownership like sale document may be called for by  it considers it necessary. (2) Utility bill must be less than 60 days old at time of application

RENTED OFFICE PREMISE

  1. Rental Agreement
  2. Electricity Bill OR Landline Bill OR Broadband bill OR Gas Bill
  3. No Objection certificate from landlord

** Utility bill must be less than 60 days old at time of application

** THE ABOVE DOCUMENTS WILL ALSO COVER FOR APPLICATION OF PA, TAN AS ALSO GST WHERE REQUIRED

OUR PROPRIETOR REGISTRATION PACKAGES

FEATURES OF PROPRIETORSHIP

Nature & Ownership:

  • Sole proprietorships are unregistered business entities owned, managed and controlled by one person. They are the most popular format for micro and small businesses operating in the unorganised sector.

 Environment & Regulation:

  • They are very easy to start. Regulatory compliance requirement for started and operating them are minimal.
  • There is no mechanism provided by the Government of India for the registration of a Proprietorship. Registration of proprietorships is established through tax and other business registrations that a business must have as per the applicable laws. This could be GST, Shops & Establishments, Professional Tax etc.
  • All the registrations for a proprietorship would be in the name of the Proprietor, making the Proprietor personally liable for all the liabilities of the Proprietorship
  • Proprietorship will have to file their annual tax return with the Income Tax Department and GST. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs like Limited Liability Partnerships and Companies.
  • Audit is not required unless the turnover exceed 40lakh (for income tax) or 2 crores (for GST)

 Banking & Operations

To open a bank account for a Proprietorship, RBI KYC (know you customer) requires that the proprietor provide two forms of registration for the Proprietorship along with the PAN Card, identity proof and address proof of the Proprietor. These could be GST registration, MSME registration, Shop & establishment Act registration, Professional license, Chartered Accountant certificate etc

ADVANTAGES AND LIMITATIONS OF PROPRIETORSHIP

ADVANTAGES OF PROPRIETORSHIP

  1. Ease of formation: Proprietary concerns can be formed easily and quickly. Very few legal formalities need to be fulfilled. There is no need to go for any registration or enter into an agreement with someone. One can form it and dissolve it quickly.
  2. Direct risk reward relationship: Proprietary concerns have a direct risk reward relationship. They have to take the risk and they get rewarded. The effort-reward relationship encourages people to chase creative ideas and turn them into successful ventures.
  3.  Complete Control: The owner has full control over everything. He is answerable to no one else and carries the entire responsibility. Right or wrong, he takes charge of the situation. The venture is a mirror image of the owners vision – he drives it  and the business keeps the owner on his toes always. It is the freedom to think and act independently that gives a lot satisfaction to the owner.
  4.  Quick Decisions: Proprietors can take quick steps and dispose of things promptly – they are not obliged to consult someone else. They can grab the opportunities may not wait for long. For example if a quick decision to grant a fat discount to a loyal customer brings them additional business, they can do so on the spot.
  5.  Economical & Efficient Operations: The owner can put together his resources to the best use since capital is invariably limited. He takes steps to eliminate wastage and control the cost of operations. The threat of losing his grip over his business and the rewards of success keeps him vigilant, alert and cautious.
  6. Keep things simple: With a low level of formalities the entire energy is focused on business and keeping in sync with market and leveraging all potential opportunities to make profits. He can run the show in sync with changing customers’ tastes and preferences and scaling up or down in line with demand with speedy decisions.
  7.  Confidentiality: With a minimal of formal disclosures to be made the proprietor is not required to share any information with anyone else. We can easily maintain confidentiality of all factors that drive success of the business. 

LIMITATIONS AND DOWNSIDES

Enterpreneurs and promoter do not have benefits such as limited liability, separate legal entity, independent existence, transferability, perpetual existence – which are desirable features for any business. Therefore, proprietorship registration is suited only for unorganised, small businesses that will remain small and/or have a limited period of existence

A COMPARISON OF ORGANISATION FORMATS

CRITERIAPRIVATE LIMITED COMPANYLIMITED LIABILITY PARTNERSHIPONE PERSON COMPANYPARTNERSHIPPROPRIETOR
Is Registration CompulsoryRequiredRequiredRequiredOptionalNo
Registration under the Act is mandatory to set up Private Limited CompanyRegistration under the Act is mandatory to set up LLPRegistration under the Act is mandatory to set up One Person Company
Both registered and unregistered partnerships are there but registered partnership preferred because of many advantagesRegistration is recommended to get the advantages of operating in a tradename
Is there a law specifically for thisYesYesYesYesNo
The Indian Companies Act 2013Limited Liability Partnership Act, 2008The Indian Companies Act 2013Indian Partnership Act, 1932Not Applicable
What is the minimum and maximum number of members2-20012 – Unlimited2-501
Requires minimum 2 and can have maximum 200 shareholdersMinimum 2 Designated Partners are required No bar on maximum number of partners: all partners need not be designated partnersOnly an individual Indian resident can be the shareholder: however there has to be one nominee alsoIt needs minimum 2 partners and can have maximum 50 partnersOnly one person being the business owner
Is it a separate Legal EntityYesYesYesNoNo
It can buy, hold, sell assets and contract liabilities in its' own nameIt can buy, hold, sell assets and contract liabilities in its' own nameIt can buy, hold, sell assets and contract liabilities in its' own nameIt has no existence which is separate or distinct from its' partnersIt has no identity separate from its' business owner
Do the members have protection from liability - is the liability limitedLimitedLimitedLimitedUnlimitedUnlimited
Liability of members is limited to the value of shares subscribedLiability of members is limited to the value of capital committed by partnersLiability of members is limited to the value of shares subscribedPartners are jointly and severally liable to pay the debts of the Partnership FirmProprietor is liable to pay the debts of the business
How are they taxed ModerrateHighModerateHighLow
Tax rate applicable for small companies is reduced to 22%With tax rate of 30% on business profit, tax benefits to partners is highTax rate applicable for small companies is reduced to 22%With tax rate of 30% on business profit, tax benefits to partners is highTaxed at par with individual
Is Audit mandatoryMandatoryDepends on circumstancesMandatoryDepends on circumstancesDepends on circumstances
Auditor must be appointed within the 30 days of incorporationApplicable when turnover exceeds INR 40 Lakh or contribution exceeds INR 25 LakhAuditor must be appointed within the 30 days of incorporationStatutory audit not applicable. Tax audit may be applicable based on turnoverStatutory audit not applicable. Tax audit may be applicable based on turnover
How are legal compliances and formalitiesHighModerateModerateLowLow
Apart from Annual filings, it has to comply with various provision laid down, but less compared to public companyAnnual filing and few event based filings are necessaryApart from Annual filing, compliances are less compared to Private CompanySeparate ITR of partnership is filed, else there is no filing requirementSeparate ITR of partnership is filed, else there is no filing requirement
Can ownership be easily transferredRestrictedRestrictedOpenRestrictedOpen
Shares can be transferred only with the consent of other ShareholdersOwnership can be changed with consent of other partnersOne member can easily transfer his/her sharesOwnership can be changed with consent of other partnersOwner can easily sell/transfer the business

FAQs ON PRIVATE LIMITED COMPANY

Partnerships in India are governed by the Indian Partnership Act 1932
Registration means registration under the Indian Partnership Act with the Registrar of firms. It does not refer to registration under the Income Tax Act, GST or any other law. Registration of partnership is not compulsory. However it is recommended that firm be registered because of various advantages
For partnership the minimum of two members is required. The upper limit on number of partners are fixed under Companies Act and not in Partnership Act. As per Indian Companies Act, 2013 a Partnership firm can have maximum 10 partners for any banking business and 100 partners in any other case.
For a partnership apart from the partnership apart from the partnership deed the following are required 1) Photographs of the partners and their proof of identity 2) Proof of address of all partners 3) Proof of place of business
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