A sole proprietor business is the easiest business type to start and operate. A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by one person. Sole proprietorships are one of the most common forms of business in India. Proprietorships are very easy to start and have very minimal regulatory compliance requirement for started and operating. You don’t need to formally register your business with your state, like companies or LLPs do.
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss, etc.
One question that’s often asked is the difference between a sole proprietor and an independent contractor. A small business can be both – a sole proprietor for the purpose of paying income taxes, and an independent contractor for the purpose of getting paid by companies for work
However, after the startup phase, proprietorship’s do not offer the promoter a host of benefits such as limited liability proprietorship, corporate status, separate legal entity, independent existence, transferability, perpetual existence – which are desirable features for any business. Therefore, proprietorship registration is suited only for unorganized, small businesses that will remain small and/or have a limited period of existence.
The existence of a proprietorship must be established through tax registrations and other business registrations that a business is required to have as per the rules and regulations. For instance, GST Registration can be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship. Thus, all the registrations for a proprietorship would be in the name of the Proprietor, making the Proprietor personally liable for all the liabilities of the Proprietorship.
Registering a Sole Proprietorship Firm in India involves a relatively straightforward process compared to other business structures. Here is a general guide on how to register a Sole Proprietorship in India: