Setting up a sole trader business? Get registered and have all government fees included, in your inbox, hassle-free. It is extremely easy to start and run! A sole proprietorship is a popular type of business in India as well as in foreign countries. Our quick and easy registration process, and get advice, support and dedicated services to help your business grow.
Sole Proprietorship Registration in India: A Detailed Guide - Overview
A sole proprietorship business in India is the simplest form of business structure that is owned, managed and controlled by the sole owner. For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations. However, its liability is unlimited and it is not considered as separate entity. It is most common forms of business in India, used by most micro and small businesses operating in the unorganized sectors. This type of entity is easy to start and carry minimal regulatory compliance requirement operating
Sole Proprietorship businesses are simpler to run and involve less paperwork, but also provide less protection than a Limited Company, because you are personally liable for all your business debts. This type of entity is easy to start and carry minimal regulatory compliance requirement operating. However, getting certificate of sole proprietorship is generally not suitable for the medium scaled and large scale businesses due to the array of disadvantages like unlimited liability, no separate legal entity, non-transferability and limited life of the business.
- 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. The proprietor does not have to particularly wind up the company in case he wants to cease operations. This saves a lot of time and effort. A sole proprietorship is governed by very less legal regulations, which help to save traders time and resources. There is no memorandum of association for sole proprietorship.
Benefits to register Sole Proprietorship
A convincing way to start a small business by a sole trader is to form a sole proprietorship and experience the ease of less paperwork and reduced cost for incorporation of proprietorship. A sole proprietorship is governed by very less legal regulations, which help to save traders’ time and resources.
Ease of Formation: Starting a proprietorship firm requires very few legal formalities. This makes it easy for you to establish one with just a little effort compared to the rewards it can get you.
Name Your Business: As a proprietor you can select any name as the name of a proprietorship is not registered. However, the name should not breach the registered trademark.
No Audit Required: A Proprietorship Firm does not attract Audit provisions unless the sales turnover exceeds 1 Cr and if the proprietor is a professional then turnover exceeds 40 Lakhs.
Control over Business: Since the proprietorship is registered in the name of one person, all the decisions are taken by proprietor and proprietor enjoys the control over business.
Checklist for Registering a Company in India
Eligibility
Any small trader or individual small businessman who has limited investment and at the beginning stage of incorporation of business can register his business as a proprietorship.
| Form of Business | PRIVATE LIMITED COMPANY | ONE PERSON COMPANY | LLP | PARTNERSHIP FIRM | PROPRIETORSHIP FIRM |
|---|---|---|---|---|---|
| Recommended For | Startups & Growing Companies | Sole Promoters | Professional Services Companies | Small Businesses Firms | Small Traders, Agents & Manufactures |
| Prevailing laws | Companies Act | Companies Act | LLP Act | Partnership Act | NA |
| Charter Documents | MOA & AOA | MOA & AOA | LLP Agreement | Partnership Deed | NA |
| Limit of Members | 2-200 | 1 | 2-Unlimited | 2-20 | NA |
| Separate legal identity | Yes | Yes | Yes | NO | NO |
| Limited Liability | Yes | Yes | Yes | NO | NO |
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FAQs
Simplified Performa for Incorporating Company Electronically, also known as SPICe, was introduced in the year 2016 for the purpose of incorporation of the companies. Under the Ease of Doing Business (EODB) initiative, the MCA released the new form SPICe+ to further ease the company incorporation process. The new SPICe+ form encompasses more features than the earlier SPICe form.
After the introduction of the SPICe+ form, the name approval has been integrated with SPICe+. Part-A of SPICe+ is for name approval. Therefore, from 15th February 2020, the RUN form can only be used for a change of name.
Company Limited by Shares: The liability of the shareholders is limited only to the amount that is unpaid on the shares held by them. Company Limited by Guarantee: A company having no share capital where the liability of the shareholders is limited up to the amount undertaken to be contributed by them in the event of liquidation of the company.
Yes. private limited companies are eligible for attracting foreign direct investments in compliance with the relevant laws and regulations.
DIN, also known as Director Identification Number, is an identification number of a person intending or has become a director in a company. DPIN, also known as Designated Partner Identification Number, is an identification number for a designated partner in LLP. It is similar to DIN in the case of companies. DIN and DPIN are issued by the Ministry of Corporate Affairs.
Yes. Even a foreign national can become a director in a private limited company.
As per the Companies Act, 2013, only an individual natural person can become a director in a company. Therefore, neither a company, firm, or association can become a director in any company. This is to ensure the fixation of duties and responsibilities that would be difficult in the case of companies and firms becoming directors.
The private limited company registration cost depends upon various factors like authorized capital, number of directors, etc. Initiate your Pvt. Ltd. Company Registration with Trade Approvals as your partner in corporate compliance! Reach out to us for any professional assistance.
