A Sole Proprietorship is a type of business with the least compliance requirement. Let us look at this in detail.
What is Sole Proprietorship?
Sole Proprietorship is a business managed by a single person. It does not require a registration as such.
Who can opt for Sole Proprietorship?
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.
What are the Advantages?
- It can be started easily by just one person.
- Minimum compliance is required to get it up and running.
- It is relatively lesser expensive to start this type of business
- There are no corporate tax payments for a sole proprietorship.
- The decision-making and the control of the business are with one person only.
What are the Disadvantages?
- There is an unlimited liability of the proprietor. He is personally liable for all the transactions he enters.
- If something happens to the sole person taking care of the business, there is always the threat of business shutting down.
- Due to a single person managing the business, there is always difficulty in raising capital.
How to register as a sole proprietorship?
- Applying for PAN. If you already have one this step is not required.
- The next step is to name the business.
- There is no formal registration required, but the next step is to open a bank account in the name of the business.
- You can also register as a Small and Medium Enterprise (SME) under MSME Act, though not mandatory, it is beneficial to be registered under the same.
- You can also register for GST if your turnover exceeds Rs 20 lakh.
One can also get a Shop and Establishment registration done.
- Utility Bill of the business place
- KYC documents of the Bank
- License issued by the shops and Establishment Act
- Income Tax Returns of the Proprietor
Any 2 of the documents can be submitted for the Bank Account opening along with the Identity and Address proof of the proprietor.
What are the Compliances required?
1. As a sole proprietor, you must file Income Tax Return annually.
2. Also, you need to file your GST Return if you are registered under GST.
3. A sole proprietor should also deduct TDS and file TDS return if liable for Tax Audit.