Sole Proprietorship

Proprietorship is a traditional and generally initial stage format of doing business in India. As compared to other forms of business enterprises, it has gained popularity as there are less procedural and regulatory aspect of doing business in Proprietorship form.

The biggest advantage is that it is easier to make both “Start and Exit” in the proprietorship form of doing business. The Proprietorship form makes sense when the entity wants to commence the business with the self-owned funds without resorting to external funding sources in the form of Equity. However, it does not have any separate legal entity in the eyes of law and therefore the financial liability of the proprietor in such a case is unlimited and can extend to all of his personal means.

· Easy to Start as its formation does not require any regulatory approval.

· Proprietorship Form is the easiest form of doing the business, as business compliance is minimal.
· Exemption from maintaining Complete Books of Account in case of Income declaration under Presumptive Income Basis up to Rs. 2 Cr.

· Exemption from Audit up to Rs. 50 lacs in case of service organization and  Rs. 100 lacs in case of others or under Income declaration under presumptive basis as above.

· Overall Lower Cost of Operation.

·  Easy to wind up the operations if required.
. Tax Benefit as Sole Proprietorship does not bear any separate entity status.The Income Tax Liability is arrived after providing for available  Income Tax exemption limit in the hands of the Individual Proprietor.

How to form a Proprietorship Firm – Documents Required

· PAN Card of the Proprietor

· Selection of Business Firm Name

· Address Proof for Place of Business

· One Statutory Registration e.g. MSME/GST/TAN or Shop and Establishment Act for opening the bank account.

· Start Doing Business

Benefits

. Easy to Start as its formation does not require any regulatory approval.

· Proprietorship Form is the easiest form of doing the business, as business compliance is minimal.
· Exemption from maintaining Complete Books of Account in case of Income declaration under Presumptive Income Basis up to Rs. 2 Cr.

· Exemption from Audit up to Rs. 50 lacs in case of service organization and Rs. 100 lacs in case of others or under Income declaration under presumptive basis as above.

· Overall Lower Cost of Operation

· Easy to wind up the operations if required.
· Tax Benefit as Sole Proprietorship does not bear any separate entity status. The Income Tax Liability is arrived after providing for available Income Tax exemption limit in the hands of the Individual Proprietor

Dis-Advantages

· Harder to open a Bank Account in the name of Proprietorship Concern. The Bank generally looks for some statutory registration of Proprietorship Entity with any Government Department like TAN, GST or Registration under Shop and Establishment Act.

· Difficulty in accessing the External Finance in the form of Debt and Equity

· Minimal Compliance status gets lost once the entity operations grows-up and becomes more or less similar with those of Partnership Firm or similar  business entity.

· Unlimited Liability of Proprietor for the Operations of the firm

Ideal for Whom

· Generally for new Start-Up Venture looking to start the operations with self-owned money.

· Small Set Up organization which can not afford the Compliance Cost and Issues involved.

· Entrepreneurs which want a complete secrecy of their financial and proprietary information.