What is Proprietor?
A proprietor is a person who handles a business himself. A proprietor must be a living person and it can’t be a legal entity or a corporate. Both the Proprietor and Sole Proprietorship are the same under the law. Hence the documents required for registration are the same for obtaining licences and certification. In case of any issues or liability in the Sole Proprietorship business, the Sole Proprietor is held personally liable for the liability.
What is Proprietorship Registration?
A business is handled by a single person (owned,maintained and controlled) is said to be a Sole proprietorship. In India it is the most common form of business which is utilised by small organisations that operate in an unorganized sector. It is recognized by other forms of registrations such as service and sales tax. Due to its shortcomings like unlimited liability of proprietor, it does have continuous existence for all these reasons small business traders and merchants use this as business structure.
Why choose a registration?
- Cost wise sole Proprietorship is cheaper than other forms
- Ease of use
- Less limitations and formalities
- Income tax leverage for those who have income less than 2 lakhs per annum
Documents needed for Proprietorship registration:
- PAN Card copy of proprietor
- Electricity/ Water bill (Office address)
- Copy of Aadhaar Card/Voter identity card
Pros and Cons of Proprietorship:
Pros:
- Easy steps to follow
- No registration required
- Can easily spend the money profited in the business
- No issues of invoices
- No additional compliance PAN of the Proprietor & Proprietorship are same
- Only income tax return in Form ITR-3 must be filed every year
Cons:
Having a Proprietorship is very easy for a business, but apart from that there are many advantages that are not covered by this sole proprietorship.
- Separate Legal Entity: Without a separate legal entity opening a bank current account becomes a lengthy process if you wish to have that in the name of a business.
- Limited Liability Protection: Any loss or liability is created by the Proprietorship business, the Proprietor will be the sole person responsible for the repayment.
- Transferability: Even certifications and license obtained will be in the name of the PAN(name of the proprietorship) that are non-transferrable.
- Perpetual Existence: The name of the proprietor and the sole proprietorship were the same, in any case if the proprietor was expired as the situation is the same for the business too.
- Fundraising: Proprietorship business cannot raise any kind of equity funds, even the banks have many restrictions while funding to a sole proprietorship organisation.
There are more negatives comparatively and this kind of proprietorship suits for the unorganised and small business concerns.
Common Registrations for Proprietorship
Some of the common registrations that are obtained for Proprietorship
MSME Registration: Inorder to establish a Sole Proprietorship MSME or Udyog Aadhaar registration can be obtained in the name of the business under the Ministry of Micro, Small and Medium Enterprises.
TAN Registration: If a Proprietor is making salary payments wherein TDS deduction is required, then he/she has to be registered for TAN and this TAN registration is made by the Income Tax department.
GST Registration: Goods and service tax is mandatory in many states in India, the GDT registration should be obtained either by the company name or in the name of proprietorship who handles the business. Even the GST registration has some threshold for the businesses. For service related business an exemption is leveraged for those who have annual revenue less than 20 lakhs, whereas for the traders it is 40lakhs.
Import Export Code: For the business which involves import and export this certification need to be obtained from the DGFT in the name of either the business or in the name of Proprietorship
FSSAI Registration: This certification is obtained from the Food Safety and Standard Authority of India, it is important for a business which involves in selling or handling the food products in the market.
Proprietorship registration
According to the Government of India, there is no mechanism for registering a Proprietorship. No authority is available on both the state and the central side to authenticate this proprietorship. Their existence can be established through either one or more tax registration or business license. At present both the MSME and GST registration can be obtained on the name of the person(proprietor)to showcase the sole proprietorship that he is the one who is handling the business.
There are no norms or procedures for registering the name of the business Proprietorship, so there is no need for any unique identity( If both business people have the same name even in those causes the proprietorship wont avail any duplication).
If a Proprietor wants to have a unique name then he/she has to do trademark registration for their brand identity. When you have any plan to register your business in Bangalore for sole proprietorship the please contact here.