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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.

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What are the Advantages?

  1. It can be started easily by just one person.
  2. Minimum compliance is required to get it up and running.
  3. It is relatively lesser expensive to start this type of business
  4. There are no corporate tax payments for a sole proprietorship.
  5. The decision-making and the control of the business are with one person only.

What are the Disadvantages?

  1. There is an unlimited liability of the proprietor. He is personally liable for all the transactions he enters.
  2. If something happens to the sole person taking care of the business, there is always the threat of business shutting down.
  3. Due to a single person managing the business, there is always difficulty in raising capital.

How to register as a sole proprietorship?

Procedure:

  1. Applying for PAN. If you already have one this step is not required.
  2. The next step is to name the business.
  3. There is no formal registration required, but the next step is to open a bank account in the name of the business.
  4. 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.
  5. You can also register for GST if your turnover exceeds Rs 20 lakh.
    One can also get a Shop and Establishment registration done.

Documents Required:

  1. Utility Bill of the business place
  2. KYC documents of the Bank
  3. License issued by the shops and Establishment Act
  4. 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?

As a sole proprietor, you must file Income Tax Return annually.
Also, you need to file your GST Return if you are registered under GST.
A sole proprietor should also deduct TDS and file TDS return if liable for Tax Audit.

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