Proprietorship Registration

Sole proprietorship is one of the oldest and easiest Business Structure to start in India. A proprietorship is a type of business that is owned, managed, and controlled by one person - who is the proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements.

As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small businesses with no more than 5 employees.

IndiaFilings can assist you in registering a Sole Proprietorship, a simple and efficient business structure that is ideal for solo entrepreneurs. With our expert guidance and streamlined process, you can start your proprietorship firm registration online quickly and hassle-free. Start your Sole Proprietorship registration with us and unlock the potential of your business ideas.

Proprietorship Registration in India

Registering a proprietorship in India follows a unique approach, as there isn't a dedicated government-established registration process for this business structure. Instead, a proprietorship firm registration gains recognition through tax registrations mandated by relevant laws and regulations.One pivotal tax registration is the GST (Goods and Services Tax) Registration, which must be secured under the proprietor's name to formalize the business's proprietorship status. This registration signifies that the proprietor is conducting business within the framework of a proprietorship.

Essential Licenses and Registrations for Proprietorships

To run a proprietorship in India, you need important licenses and registrations, including:

  • Get a Permanent Account Number (PAN) and an Aadhaar card for your business identification.
  • Register under UDYAM, which recognizes your business as a Micro, Small, or Medium Enterprise (MSME) and offers government benefits.
  • If your business exceeds specific thresholds, you must register for Goods and Services Tax (GST) to collect and pay GST.
  • Open a separate bank account for your business to manage finances smoothly.
  • Depending on your business location, register under your state's Shops and Establishment Act to follow local labor regulations.

Advantages of Proprietorship

Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process - as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.

Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.

Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.

Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.

Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.

Disadvantages of Sole Proprietorship

Funding: This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible - as this type of business entity does not allow for profit sharing or shareholding.

Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship - the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure - the proprietor will be held personally liable until all the liabilities are extinguished.

Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.

Growth: A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.

Unincorporated business: Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.

Registering a Proprietorship Online through IndiaFilings

You can easily complete proprietorship firm registration online through IndiaFilings. For a sole proprietorship registration, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:

  • GST Registration
  • UDYAM Registration
  • Zero-Balance Business Current Account with LEDGERS Accounting Software

Once, you have registered for the proprietorship firm registration online on IndiaFilings, please follow the steps below and upload the following documents by logging into LEDGERS.

  • Step 1: Login to LEDGERS using the email address for payment.
  • Step 2: Go to Services Tab & Select Proprietorship Engagement
  • Step 3: Upload your PAN & Aadhar Card Copy
  • Step 4: An IndiaFilings Registration Expert will file the registration application with GST Department, MSME Department and Bank for Current Account.
  • Step 5: Access to LEDGERS Accounting Software is provided for GST invoicing, GST filing and other services.

PAN Card for Proprietorship Firm Registration

A proprietorship is not a separate business entity. Hence, there is no procedure to obtain proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.

Obtaining GST Registration for Proprietorship

GST registration for a proprietorship will be obtained by IndiaFilings as a part of the service. The following documents are required for GST registration:

  • Permanent Account Number (PAN) of Proprietor
  • Digital Signature Certificate of the Authorized Signatory
  • Consent by Proprietor for obtaining GST Registration
  • Photograph of Proprietor and Authorized Signatory
  • Bank Account Details: A scanned copy of a cancelled cheque with the business entity's name, bank account number, MICR, IFSC, and branch information.
  • Declaration / Authorization to Authorized Signatory
  • For commercial purposes, the rent / lease agreement should be in the name of the proprietor.
  • Additional documents such as Aadhaar Card, Driving Licence, Passport, or Voter ID in the name of the Owner with the complete address of the premises should also be provided if the address on the ownership document (Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill) is incomplete.

Obtaining UDYAM Registration for Proprietorship

Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the IndiaFilings team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to Government.

Bank Account for Proprietorship

The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof for doing business. Any two of the following documents can be submitted to create a current account instead of savings account in the name of proprietorship:

  • GST registration certificate
  • Shop & Establishment Act license
  • License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities,
  • Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account etc.

Obtaining Shops & Establishment Act License for Proprietorship

From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-3 weeks.

Timelines for Sole Proprietorship Registration

A sole proprietorship registration can normally be done in India through IndiaFilings in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.

Proprietorship Business Activities

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship registration:

Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold - tax must be deducted at source and TDS returns must be filed every quarter.

In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

Proprietorship vs Limited Liability Partnership (LLP) vs Company

Features Proprietorship Partnership LLP Company
Definition Unregistered type of business entity managed by one single person A formal agreement between two or more parties to manage and operate a business A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. Registered type of entity with limited liability to the owners and shareholders
  • Sole Ownership
  • Min 2 Partners
  • Max 50 Partners

For One Person Company
  • 1 Director
  • 1 Nominee Director
Registration Time 7-9 working days
Promoter Liability Unlimited Liability Limited Liability
  • LLP Deed
  • Incorporation Certificate
Governance - Under Partnership Act LLP Act, 2008 Under Companies Act,2013
Transferability Non Transferable Transferable if registered under ROF Transferable
Compliance Requirements
  • Income tax filing if turnover is more than Rs.2.5 lakhs
Know More

Proprietorship FAQ's

What is meant by proprietorship firm?

A proprietorship firm is a type of business structure where a single individual owns and manages the entire business. The proprietor is personally liable for all the debts and obligations of the firm. Proprietorship firms are easy to set up and operate, making them a popular choice for small businesses and startups in India.

What are the types of proprietorship?

There are mainly four types of proprietorship in India:
  • Sole Proprietorship
  • One Person Company (OPC)
  • Registered Proprietorship
  • Unregistered Proprietorship
Each type of proprietorship has its advantages and disadvantages, and the choice of business structure depends on the proprietor's needs, goals, and resources.

What is the difference between proprietorship and firm?

Proprietorship and firm are often used interchangeably, but there is a subtle difference between the two. Proprietorship refers to a type of business structure where a single individual owns and manages the entire business, while a firm refers to a group of individuals who come together to carry out a business activity. In a firm, the ownership is shared among the partners, and the profits and losses are also shared among them. In contrast, in proprietorship, the proprietor has complete control over the business, and all the profits and losses belong to the proprietor alone.

Is there any certificate of Incorporation?

No, there is no certificate of Incorporation given.

Are there any compliances for the sole proprietorship?

As the sole proprietorship and the proprietor are the same the individual has to just file the Income-tax returns and GST returns filing for the proprietorship firm.

Is there any minimum requirement to start a sole proprietorship?

No, there is no minimum requirement to start a sole proprietorship in India.

How long does the sole proprietorship exist?

The sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.

Is the owner of the sole proprietorship considered to be the same as the sole proprietor?

Yes, a sole proprietor is considered to be the same as the sole proprietor.

What are the licenses required for proprietorship registration?

It generally differs from state to state as in Maharashtra a Shop and Act license is required and for West Bengal, the trade license is required.

What is the role of the proprietor in sole proprietorship?

The proprietor owns, controls, and manages the sole proprietorships. He has a complete hold over the proprietorship.

Can I get PAN card for sole proprietorship?

No, PAN card cannot be obtain for proprietorship. Proprietorship PAN card will be the same as proprietor PAN card. There is no separate PAN card for proprietorship business.

Can I open bank account in proprietorship business name?

Yes, proprietorship current account can be opened in the name of the business. However, for all legal and official purposes - the PAN card of the proprietor will be used. Hence, the ultimate owner and operator of the proprietorship bank account will be the proprietor.

Can I operate a proprietorship from my house?

Yes, you can operate a proprietorship business from your house as long as it complies with other regulations that maybe applicable for your business.

What is the address proof for proprietorship?

Any official document that has the name of the proprietor, photo and address like driving license or passport can be used as address proof for proprietorship. In addition to the above, a utility or EB bill in name of proprietor can also be submitted.

What are the mandatory licence to be obtained for a sole proprietorship?

The licenses and registrations for a sole proprietorship will vary depending on the type of business activity.

Is GST registration mandatory for a sole proprietorship?

No, GST registration is not mandatory for proprietorship. However, it is recommended that all proprietorship be registered under GST and have UDYAM registration to undertake various business activities.

What is a sole proprietorship?

Proprietorships in India are a type of unregistered business entity that is owned, managed, and controlled by one person. The micro and the small businesses that are operating in the unorganized sector prefer getting registered as Sole proprietorships.

Who can get sole proprietorship registration?

An Indian Citizen with a current account in the name of his/her business can get a sole proprietorship registration.

How long does it take to register a sole proprietorship in India?

It takes around 8 to 10 days but is subject to government processing and document submission.

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Related Business Registrations

In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.

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Customer Reviews For Proprietorship

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