AMM & ASSOCIATES

CHARTERED ACCOUNTANTS

Madan Mohan Arora

Chartered Accountant

Madhu Arora

Company Secretary

AMM & ASSOCIATES

CHARTERED ACCOUNTANTS

proprietary company registration

    proprietorship company registration

    What is a Proprietorship Company in India?

    In India, a proprietorship company, commonly known as a sole proprietorship, is a business structure owned and managed by a single individual. It is the simplest business entity, with no legal distinction between the owner and the business. That means the owner enjoys all profits but is also personally liable for debts and losses. Sole proprietorships are popular among small traders, freelancers, consultants, and shopkeepers due to their ease of setup and minimal reg ulatory requirements.

    Unlike companies or partnerships, a sole proprietary in India does not require registration under the Companies Act 2013, as it is not considered a separate legal entity. However, specific registrations are necessary to operate legally, access benefits, and comply with tax and business laws.

    Steps to Register a Proprietary Company in India

    Registering a sole proprietorship in India is straightforward. It involves multiple registrations depending on the business’s nature and scale. Below is a step-by-step guide:

    1. Choose a Business Name

    • The business can operate under the owner’s name (e.g., “Rajiv Kumar”) or a trade name (e.g., “Rajiv Enterprises”).
    • Ensure the name is unique and not trademarked by another entity. While not mandatory, checking the MCA (Ministry of Corporate Affairs) portal or trademark registry can avoid future conflicts.

    2. Gather Required Documents

    Common documents include:

    1. PAN Card: Permanent Account Number of the owner, mandatory for tax purposes.
    2. Aadhaar Card: Widely accepted as proof of identity and address.
    3. Proof of Address: Utility bill, rent agreement, or property documents for the business premises.
    4. Passport-sized Photo: Required for applications.

    3. PAN Card (if not already obtained)

    The owner’s PAN is used for all tax-related filings, as the business income is taxed as personal income.

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    4. Obtain GST Registration (if applicable)

    GST registration is mandatory if:

    1. Annual turnover exceeds ₹40 lakh.
    2. The business involves an inter-state supply of goods or services.
    3. The business sells through e-commerce platforms.

    Small businesses below the threshold can opt for voluntary registration to claim input tax credits.

    5. Register as an MSME (Optional)

    • Registering under the Udyam Registration Portal classifies the business as a Micro, Small, or Medium Enterprise.
    • Benefits include priority lending, subsidies, and tax exemptions.
    • Requires Aadhaar, PAN, and basic business details.

    6. Open a Current Bank Account

    Banks require proof of business existence to open a current account in the business name. Acceptable documents include:

    1. Shops and Establishments certificate.
    2. GSTIN certificate.
    3. MSME registration certificate.

    Additional requirements: PAN, Aadhaar, and address proof of the owner.

    7. Obtain Trade-Specific Licenses (if applicable)

    Certain businesses need additional permits:

    • FSSAI License: For food-related businesses (e.g., restaurants, caterers).
    • Trade License: Issued by municipal corporations for specific trades.
    • Professional Tax Registration: Mandatory in some states if hiring employees.

    Check with local authorities or industry guidelines for relevance.

    8. File Taxes and Maintain Records

    • Income from the proprietorship is reported under the owner’s ITR (Income Tax Return), typically ITR-3 or ITR-4, depending on the business type.
    • Maintain books of accounts if turnover exceeds ₹25 lakh or income exceeds ₹2.5 lakh (as per Section 44AA of the Income Tax Act).

    Key Features of a Proprietorship Business Registration in India

    • Ownership: Single owner with complete control.
    • Liability: Unlimited—personal assets are at risk.
    • Taxation: Taxed as individual income under slabs (e.g., 5%–30% based on income level); no separate business tax.
    • Compliance: Minimal compared to LLPs or companies, but GST and income tax filings are critical.
    • Closure: Simple—cancel registrations and stop operations.

    Proprietorship vs. Private Limited Company vs. LLP

    Feature Partnership Firm Private Limited Company LLP (Limited Liability Partnership)
    Ownership
    Single Owner
    2 or more shareholders
    2 or more partners
    Liability
    Unlimited
    Limited
    Limited
    Compliance
    Low
    High
    Moderate
    Taxation
    Individual tax slab
    Corporate tax
    LLP tax rates
    Fundraising
    Difficult
    Easy through investors
    Moderate
    Registration Cost
    Low
    High
    Moderate

    A proprietorship company is the simplest form of business in India. It is ideal for small businesses, freelancers, and individual entrepreneurs. It allows for quick setup, minimal compliance, and complete control over business operations. However, due to unlimited liability and difficulty in scaling, it is advisable to transition to an LLP or Private Limited Company as your business expands.

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