Proprietorship is one of the easiest and oldest forms of business structure in India, which is owned, managed, and controlled by one person called a proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements. However, to operate a business legally, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India. This article explains everything you need to know about proprietorship registration in India, including the documents required, legal entity status, advantages, and disadvantages.

What is a Sole Proprietor?

A sole proprietor is the sole owner of the proprietorship business, which means a business will be carried forward by making a new bank account for the business, and GST registration will be done by using PAN and Aadhar of the proprietor. The proprietor is completely responsible for all the assets and liabilities of the business.

Proprietorship Legal Entity Status and Recognition

There is no separate recognition of proprietorship as a separate legal entity. Hence, the business owner and the proprietorship are considered one and the same for all legal and official purposes. However, certain registrations and licenses are required for running a proprietorship business in India.

Sole Proprietorship Registrations & Licenses

To run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, UDYAM registration and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration. In addition to the basic requirements above, additional licence and permits may be required depending on the industry, state, and local regulations.

Advantages of Proprietorship

1. Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process, as it’s the same as the proprietor. However, to operate a business legally, certain registrations and licenses are required, which is relatively easy to obtain.
2. Lower compliance: As most proprietorships 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.
3. 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.
4. 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.
5. Complete control: As a 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

1. Funding: This type of business structure relies solely on one person’s savings, borrowings, and credit history. As there are no other persons 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.
2. 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.
3. Business continuity: In case of death or disability of the business owner, the sole proprietor

How to Register a Proprietorship Online Through Tax Zone India

If you’re an entrepreneur in India looking to start a sole proprietorship, the process can seem daunting. Fortunately, Tax Zone India makes the process of registering a proprietorship online easy and straightforward. In just a few simple steps, you can obtain all the necessary registrations and set up a bank account for your business.

Here’s what you need to know about registering a proprietorship online through Tax Zone India.

Step 1: Gather Your Documents

To register your proprietorship, you’ll need to have the following documents:

• PAN card of the business owner
• Aadhaar card of the business owner

If you don’t already have these documents, you’ll need to obtain them before you can proceed with the registration process.

Step 2: Choose Your Registrations

Tax Zone India can help you obtain several registrations for your proprietorship, including:

• GST registration
• UDYAM registration
• Zero-balance business current account with LEDGERS accounting software

GST Registration

Goods and Services Tax (GST) registration is mandatory for businesses with an annual turnover of more than Rs. 40 lakh (or Rs. 10 lakh for businesses in Northeastern states). If you’re starting a proprietorship and expect to exceed this turnover threshold, you’ll need to register for GST.

Tax Zone India can help you obtain GST registration as part of their proprietorship registration service. To do so, they’ll need the following documents:

• Permanent Account Number (PAN) of the proprietor
• Digital Signature Certificate of the authorized signatory
• Consent by proprietor for obtaining GST registration
• Photograph of proprietor and authorized signatory
• Bank account details (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
• Rent/lease agreement in the name of the proprietor for commercial purposes
• Additional documents (such as Aadhaar card, driving license, passport, or voter ID) in the name of the owner with complete address of the premises, if the address on the ownership document (property tax receipt or municipal Khata copy or copy of electricity bill) is incomplete

UDYAM Registration

UDYAM registration is an online registration process that allows small and medium-sized businesses to avail various benefits. Once you’ve obtained GST registration, Tax Zone India can help you obtain UDYAM registration by submitting your Aadhaar card, PAN card, and GST certificate to the government.

Step 3: Register Your Proprietorship Online

To register your proprietorship online through Tax Zone India, follow these steps:

• Go to taxzoneindia.com and select the ‘Proprietorship’ option.
• Provide your PAN and Aadhaar card details.
• Choose the registrations you require (GST, UDYAM, and/or bank account).
• Pay the registration fees.
• Once the payment is complete, you’ll receive an email with your login credentials for LEDGERS accounting software.

Step 4: Upload Your Documents to LEDGERS

Once you’ve registered your proprietorship online through Tax Zone India, you’ll need to upload your documents to LEDGERS accounting software. Here’s how:

• Login to LEDGERS using the email address you used for payment.
• Go to the ‘Services’ tab and select ‘Proprietorship Engagement.’
• Upload your PAN and Aadhaar card copies.
• An Tax Zone India registration expert will file the registration application with the GST department, MSME department, and bank for your current account.
• Access to LEDGERS accounting software is provided for GST invoicing, GST filing, and other services.

Bank Account for Proprietorship

After completing the registration process for your proprietorship with Tax Zone India, you will receive guidance and support from their team to set up a zero-balance business current account with LEDGERS Accounting Software.

1. The LEDGERS Accounting Software is a user-friendly platform that simplifies the accounting process for your business. It allows you to easily manage your business transactions, create invoices, track expenses, and prepare financial statements.

2. To set up your bank account, you will need to provide certain documents and information such as your PAN card, GST certificate, proof of business address, and cancelled cheque with the business entity’s name, bank account number, MICR, IFSC, and branch information.

3. Your bank account will be created in the name of the business owner using his/her PAN. As a proprietorship is not a separate legal entity, the owner’s PAN card is used for all business transactions and the bank account is linked to the same.

4. To open a current account instead of a savings account, you will need to submit proof of doing business. Any two of the following documents can be submitted to create a current account:

• 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
• IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account, and so on.

6. Once you have provided all the necessary documents, the Tax Zone India team will file the application for a current account with the bank on your behalf.

7. The bank may take a few days to process the application and create your current account. Once the account is created, you will receive the account details such as the account number, IFSC code, and other relevant information.

8. You can then link your bank account to the LEDGERS Accounting Software provided by Tax Zone India to easily manage your financial transactions and stay compliant with accounting and tax regulations.

9. It is important to regularly monitor your bank account and ensure that all transactions are accurately recorded in your accounting software to maintain proper financial records and comply with tax regulations.

By following these steps, you can easily set up a zero-balance business current account for your proprietorship and simplify the accounting process for your business.

Obtaining a Shop and Establishment Act License for Proprietorship

The Shops and Establishment Act regulates the working conditions of employees working in commercial establishments such as shops, restaurants, and other businesses. The registration of a shop or commercial establishment is mandatory in India under this Act. However, the process of obtaining a Shop and Establishment registration certificate varies from state to state. It can be done both online and offline.

In most states, the registration can be obtained within 2-3 weeks. The following are the documents that are required for obtaining a Shop and Establishment Act License for a proprietorship:

1. Identity proof of the proprietor, such as Aadhar card, PAN card, Voter ID card, or Passport
2. Address proof of the proprietor, such as Aadhar card, utility bill, or bank statement
3. Rental agreement or ownership proof of the business premises
4. NOC from the landlord
5. Details of the employees, such as name, address, and age

Once the registration is obtained, the business owner can start operating the business without any legal hassles.

Timelines for Sole Proprietorship Registration

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

The following are the business activities that can be undertaken by a sole proprietorship:

1. Trading and selling of goods
2. Providing services
3. Manufacturing of products
4. Consulting services
5. Freelancing
6. E-commerce business

Compliances for Proprietorship