What is Sole Proprietorship?
A sole proprietorship is a business that is owned and managed by a single person. You could have one up and running within 15 days, which makes it very popular among the unorganised sector, particularly small traders and merchants
There is no such thing as registration; proprietorships are recognised by other registrations, such as a service tax registration or sales tax registration. As you would imagine with a Business Plan that’s so easy to set up, though, its shortcomings are severe: the liability of the proprietor is unlimited and it does not have a continuous existence.
Small manufacturers and traders, who typically have just a service tax or VAT registration, are known as sole proprietors.
6 Essential Facts on Sole Proprietorship
Any Indian citizen with a current account in the name of their business can start a sole proprietorship. Registration may or may not be required, depending on what business you are planning to establish. However, to open a current account, banks typically require a Shops & Establishments Registration.
To open a current account, you need proof of the existence of your business. Most banks will ask for a Shops & Establishments Act Registration. In addition, you will need a PAN card and address and identity proofs.
A sole proprietorship business does not take more than 15 days to open-up and get running. This simplicity makes it popular among the small traders and merchants. It's also much cheaper, of course. This is the other reason why it's the most widely used business structure.
Most local businesses are run as sole proprietorships, from your grocery store to a fast food vendor, and even small traders and manufacturers. This is not to say that larger businesses do not operate as sole proprietors. Even some jewellery shops are sole proprietors, but this is not recommended.
To start a sole proprietorship, you would need address and identity proofs, PAN card, all KYC documents and rental agreement or sale deed (in case of Shops & Establishment Act Registration).
This depends on the business you're in. If you're running a departmental store, then you would also need a VAT Registration once your turnover is over Rs. 5 lakh per annum. If you're running a air-conditioned restaurant, you would need a VAT Registration and Service Tax Registration.
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