How to Register a Sole Proprietorship Company/Firm in Chennai?

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Sole Proprietorship Company/Firm Registration in Chennai

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Explained: Sole Proprietorship Registration Online Process in Chennai

A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person. Sole proprietorship is the most common type of business in India and it is used by most micro and small businesses operating in the unorganized sectors.

Proprietorships are simple to start and have minimal regulatory compliance requirements for operating. This entity is ideal for entrepreneurs who are getting into business for the first time and for small businesses with few clients.

Who is a Sole Proprietor?

The owner of a sole proprietorship business in India is called a proprietor. It cannot be a corporate or legal entity. The proprietor and the proprietorship are considered to be the same entity legally.

The PAN and other documents of the proprietor are the basis for obtaining all other business registrations and licenses. In case of any issues of liability in the business, the proprietor is held personally liable for it.

What is Proprietorship?

Proprietorship Definition: A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person.

Sole proprietorship is the most common type of business in India and it is used by most micro and small businesses operating in the unorganized sectors.

Proprietorship are simple to start and have minimal regulatory compliance requirements for operating.

This entity is ideal for entrepreneurs who are getting into business for the first time and for small businesses with few clients.

Proprietorship Firm Registration Process in Chennai

Each proprietorship differs in terms of the functions, clientele and the mode of operations. Hence, a couple of the registrations mentioned below will be applicable.

MSME registration

MSME or Udyog Aadhaar registration can be obtained in the name of the business to establish that the sole proprietorship is registered with the Ministry of Micro, Small and Medium Enterprises.

TAN registration

TAN registration must be obtained for the proprietor from the income tax department if the proprietor is making salary payments wherein TDS deduction is required.

GST registration

GST registration must be obtained if the proprietor is selling goods or services that cross the GST turnover threshold limit for registration. In most states, GST registration is required for service providers having annual revenue of more than Rs.20 lakhs and in case of traders – annual revenue of more than Rs.40 lakhs.

Import Export code

Import Export Code or IE code can be obtained from the DGFT in the name of the business – in case of a proprietorship business undertaking export and/or import of goods into India.

FSSAI registration

In case the proprietorship is involved in the selling of food products or handling of food products, FSSAI registration must be obtained from the Food Safety and Standard Authority of India in the name of the proprietor.

Current account

A current account can be opened for a sole proprietorship through IndiaFilings from various banks in India. IndiaFilings offers exclusive partnerships through which zero-balance current accounts can be opened. It is recommended that GST registration be obtained for the same.

Benefits of Proprietorship Formation

Advantages

Ease of setup- The entrepreneur can start operations and receive payments from clients as no registrations are required to start a proprietorship.

Ease of compliance- The other advantage of a Proprietorship is that it requires no additional compliance in most cases. The PAN of the proprietor and proprietorship are one and the same. Hence in most cases, only income tax return in Form ITR-3 must be filed every year.

Ease of dissolution- The proprietor does not have to particularly wind up the company incase he wants to cease operations. This saves a lot of time and effort.

Disadvantages associated with Proprietorship

Liability protection: A sole proprietorship does not provide the proprietor with limited liability protection. So the proprietor would be held personally liable in case of any loss or liability.
Transferability: Any license or registration obtained in the name of the proprietorship cannot be transferred to any other person or entity.
Lifespan: The existence of the sole proprietorship is tied to the proprietor hence it would cease to exist with the proprietor.
Fundraising: A proprietorship cannot raise equity funds from angel investors, venture capital firms or PE funds. Banks also tend to restrictions on the amount of credit they can lend.

Due to the disadvantages mentioned above, this registration will be suitable only for small businesses and the unorganized sector with a limited period of existence.

Documents Required For Proprietorship Registration in Chennai

Document Required for Opening Proprietorship Bank Account

Based on the above RBI guidelines, various banks have enacted procedures and list of documents required for opening a current account in the name of a Sole Proprietorship firm. The following is a Bank’s list of documents required for opening Proprietorship Bank Account.

First Sole Proprietorship Proof (Any one of the following documents)

Any certificate issued for registration/operations/Trade License/business by Local/ State/ Central Government/ Government Agency/ SEBI/ IRDA/ ICAI/ ICSI/ ICWAI/ Office of Registrar of Newspapers for India in the name of entity/firm. Eg: Sales Tax, TIN/ TAN etc.
APMC/ Mandi License/ Certificate
Labour License/Certificate
Professional Tax Registration Certificate
Trade Mark Registration Certificate
Liquor License/ Registration Certificate
Drug License
Registration Certificate issued by Excise & Customs Department.
License/ Certificate to Sell/ Stock/ Exhibit for Sale or Distribute Insecticide/Pesticide
Registration Certificate issued under Weight & Measurement Act
Police Department Permission/License/Certificate
Regional Transport Office Permit/Registration Certificate
Consent to Operate document issued by State/Central Pollution Control Board
Sales Tax Registration Certificate/ TIN Certificate/ GST Registration Certificate/ TAN certificate.
Valid Shops & Establishment Certificate/ Trade License. Validity can be extended up to the grace period for renewal as mentioned in such certificate.
Certificate Issued by SEZ, STP, EHTP, DTA and EPZ in the name of the entity mentioning the address allotted.
Importer–Exporter Code Certificate along with PAN Card (if PAN is quoted on the IEC Certificate).
Gram Panchayat Certificate (should be on letterhead and not more than 3 months old).
Trade License in the name of the entity.
District Industries Center (DIC)/ Small Scale Industries (SSI) Certificate – Acknowledgment Part -II issued by DIC/ SSI containing Entrepreneur’s Memorandum Number. Duly stamped and signed by issuing authority.
Factory Registration Certificate in the name of the entity.
SEBI Registration Certificate in the name of the entity.
Certificate of enlistment/license/shop allotment letter issued by Municipal Corporation (Kolkatta, Ludhiana and others).
Shops & Establishment Certificate issued by E-Seva Kendra’s (Andhra Pradesh). Receipt issued only by Municipal Corporation of Hyderabad (MCH) to be accepted along with Shops & Establishment Certificate.
The Shops and Establishment Certificate issued by the Municipal Corporations in West Bengal are valid till March 31 every year.

How much does it cost to register a company in Chennai?

Sole Proprietorship Registration FAQ’s

–> General Questions

How many person are required to start a proprietorship business?

Only one person is required to start a proprietorship as it can have only one promoter.

What are the requirements to be a proprietor?

The proprietor must be an Indian citizen and resident. Non-resident Indians and persons of Indian origin can only invest in a proprietorship with prior approval from the Government of India.

Will my proprietorship firm have a separate legal identity?

No, the proprietorship firm and the proprietor are one and the same legally. The PAN of the proprietor will be the PAN of the firm. Therefore, there will be no separate legal identity for the business. The assets and liabilities of the business and the proprietor will also be one and the same.

How can I transfer my proprietorship?

A business operated under a proprietor cannot be transferred to another person unlike a limited liability partnership or a private limited company. Only the assets in the proprietorship can be transferred to another person through sale. Intangible assets like government approvals, registrations, etc., cannot be transferred to another person.

Can other people invest in a proprietorship?

Proprietorship firms are business entities that are owned, managed and controlled by one person. So they cannot issue shares or have investors.

Can I later convert my proprietorship into a company or LLP?

Yes, there are procedures for converting your proprietorship business into a company or an LLP at a later date. However, the procedures for the same are cumbersome, expensive and time-consuming. Therefore, it is wise for entrepreneurs to consider and start an LLP or a company in case they are expecting it to be operational at a bigger scale or they want to raise investment.

What is the capital required to start a proprietorship?

There is no limit on the minimum capital required to start a proprietorship.

–> Registration Process

What are the documents required to start a proprietorship?

PAN of the proprietor along with the identity and address proof is sufficient to start a proprietorship and obtain other registrations, as applicable or required.

How will IndiaFilings help me start a proprietorship?

An IndiaFilings associate will understand your business requirements and help you start a proprietorship by obtaining the relevant registrations. IndiaFilings will help obtain the necessary registrations to help the proprietor open a bank account in the name of the business, thereby providing an identity for the business.

How do I open a bank account for a proprietorship?

The Reserve Bank of India mandates that the proprietor provide two forms of registration of the proprietorship along with the PAN, identity proof and address proof of the proprietor.

The two forms of registration can be any two of the following: MSME registration, Shop & Establishment Act registration, professional license, chartered accountant certificate or others as provided in the RBI KYC norms.

Will my firm have a registration certificate?

Proprietorship firms do not have a certificate of incorporation or a certificate of registration. The identity and legitimacy of a proprietorship firm is established by registering with the relevant or applicable Government authorities.

How to register the name of a proprietorship?

There is no registry or regulation for registering the name of a Proprietorship. Therefore, proprietorship firms can adopt any name that does not infringe on registered trademarks. Since there are no regulations for registering the name of a proprietorship, the only way to ensure exclusive use of the business name is to obtain a trademark registration of the business name.

What are the annual compliance requirements?

Proprietorships will have to file their annual tax return with the Income Tax department. However, annual reports or accounts need not be filed with the Ministry of Corporate Affairs which is required for an LLP or a company.

Is audit required for a proprietorship?

It is not necessary for proprietorships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criteria.