Every Indian wishes to start a business once in a lifetime and if we want to choose a business type at the beginning stage, we surely choose Sole Proprietorship.
The reason behind this is Sole Proprietorship is the easiest form of business and has a minimal procedure to establish it.
A sole proprietorship business is run by one person. Liability in a Proprietorship Business is unlimited it means you are the only one responsible for everything in the business.
In this blog, we will understand what is the process for the formation of a Proprietorship Business, the documents required, applicable tax laws, and much more.
DOCUMENTS REQUIRED FOR SOLE PROPRIETORSHIP REGISTRATION IN INDIA.
- Aadhar card
- Pan Card
- Bank Account (Saving or Current)
- Business address proof. (Rent Agreement, Electricity Bill if owned)
DIFFERENT LICENSES AND REGISTRATION FOR PROPRIETORSHIP.
1. PAN CARD:
Under a sole proprietorship, there is only one owner, and there is no separate PAN card on the business name.
Owner’s PAN is considered a business PAN card for Taxation and legal purposes.
You can apply for a new Pan Card through the NSDL Site
PAN Card Charges are Rs. 107/- only.
2. SHOP AND ESTABLISHMENT ACT LICENSE:
Shop and establishment license is applied as per local law in the state.
There is a different process in different states. It is issued based on the Nature of the Business and the number of employees working in the business.
All proprietors who own shops or establishes commercial establishment are required to obtain this license.
3. MSME/UDYAM REGISTRATIONS:
Udyam Registration is an electronic certificate issued by the government to Micro, Small, and Medium Sized Enterprises.
MSME license can be applied with simple steps at Zero Cost.
Udyam Registration is Aadhar card based so make sure that your mobile number is registered with an Aadhar card for Aadhar OTP.
You will be categorized under Micro, Small, and Medium business depending on your turnover in the last financial year.
| S.No | Enterprise | Turnover (In Rupees) |
| 1 | Micro | 5 Crore |
| 2 | Small | 50 Crore |
| 3 | Medium | 250 Crore |
4. GST REGISTRATION:
GST Registration is Mandatory only if Business Turnover exceeds a certain limit. Currently, the threshold Limit for GST registration is-
Service Business: Rs. 20 Lakh/-
Trading Business: Rs. 40 Lakh/-
Trading + Service Business: 20 Lakh/-
5. PROFESSIONAL TAX:
Professional tax Rules differ from state to state, in Maharashtra State PTEC is mandatory for all kinds of Business Owners, and they have to Pay a Minimum of Rs. 2500/- PT through Challan. (For some businesses this amount may vary)
So PTEC is for Business Owners and all kinds of entities except Partnership firms and HUF. (Members or Partners need to take PTEC personally for all entities)
PTRC is applicable when the Salary of Employees exceeds the given limit decided by the Government.
Currently in Maharashtra State PTRC is applicable for Male employees if the Monthly salary exceeds Rs. 7500/- and for Female employees if the salary exceeds Rs. 25000/-
6. INCOME TAX FOR PROPRIETORSHIP BUSINESS:
For Individuals in India, Income Tax is calculated as per Slab (Except for Special Income like Capital Gain).
Currently, there are two Tax Regime the old/Normal Tax Regime and the Default/New Tax Regime.
For Small Businesses there is Scheme of Presumptive Tax Scheme (44AD/4ADA) where they can save maximum tax.
The proprietor may need to file any below ITR form depending upon his/her kind of Income.
- ITR-3 (Large Proprietorship maintaining Books of accounts or getting accounts audited)
- ITR-4 (For Small Proprietorship availing Presumptive Tax Scheme)
Q&A
1) Should the bank account be in the name of the sole proprietorship firm?
Ans: Yes, a bank account must be opened by the sole proprietor in the name of his/her sole proprietorship business. A sole proprietor must open a current account and carry out all the proprietorship business transactions in the account of the sole proprietorship firm.
2) Do I need to take a separate PAN card for Business?
Ans: As we discussed in a sole proprietorship business there is no separate Pan Card of business. Proprietor/Owner Pan Card will be considered for Taxation and Other purpose.
3) If I start a business from my house then what is the registered address proof of business?
Ans: The registered office proof in such a case will be your house address. In case your house is rented, you will need to submit the rental agreement and NOC from the owner for operating your business from home as an office address proof. In case you start your sole proprietorship business from your own house, you can submit the commercial electricity or gas bill or delivery/dispatch receipts of goods or services issued to your customers containing your home address as proof of office address.
Disclaimer: The information presented on this site does not constitute legal or professional advice. It should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.
