Starting a sole proprietorship business in India is fairly an easy affair. Sole Proprietorship is a “Single-Person Establishment” and is the most simple form of an entity with minimal compliance procedures. This type of business can be incorporated in fifteen days. Generally, the registration for a sole proprietorship is completely optional and it does not require any formal registration as such but to get tax benefits, people do register their firm as a sole proprietorship.
Ways of registering a sole proprietorship
Before going for sole proprietorship registration, you need to take care of some basic things. Firstly, you have to decide on a suitable business name and choose a suitable location as the designated place for doing your business. After this, Generating a current account is considered to be the groundwork for starting this business. A current account ensures safe payments in the proprietorship’s name.
Let’s now understand how an individual can register for a sole proprietorship in India. Even though a sole proprietorship business does not need any specific registration, the owner is advised to get a few essential registrations to make the business function in a better way. The following are discussed below :
Registration under Shop and Establishment Act
Registration of your firm under the Shop and Establishment Act will provide you with the license as it gives you the right of doing business in your locality or your state. You can register your sole proprietorship business under the Shop and Establishment Act by applying to the city’s local Municipal Corporation. This license is given based on the number of employees working in a company. The registration process depends state-wise and business owners need to check the specific state-wise website for the registration. It will also provide the ease of opening a current account with any of the banks in the name of your business. You can also avail beneficiary schemes from the State DIC Department as well by this.
However, it’s not mandatory for all sole proprietorship firms but most of them have to obtain this license to comply with the local laws of the region of the business.
Udyog Aadhaar under Ministry of MSME
Udyog Aadhaar is a new method of registration under the Ministry of MSME. A sole proprietor can apply for Udyog Aadhaar to get a unique identification number provided by the Ministry of MSME. A business can register itself to avail of the benefits of the various schemes introduced by the Ministry of MSME by getting the Udyog Aadhar.
Applying for Udyog Aadhar is a simple and easy process for sole proprietors. However, it is not compulsory to get an MSME registration, but it enhances the chances of the business to get future loans and an upper hand in various other legal matters. Several schemes are also being run by the government to benefit the SMEs where loans are granted to them at low-interest rates.
Registration under GST
Registration under GST depends on the business you’re in. If the business you are in deals with any kind of exchange of goods and services and has a turnover of Rs 40 lakhs or more during a financial year (Rs 10 lakhs for special category North Eastern states) then, it needs to get registered under GST. GST registration is also seen as another way of getting your sole proprietorship registered but it is important to note that it is not mandatory for sole proprietorship firms. Getting GST registration under GST Act will also help the owner to keep an eye check on his taxation through all the transactions made in the name of the proprietorship firm.
Besides, small businesses can reduce their taxation and compliance load significantly by smartly opting for the scheme provided under the GST regime.
Some banks do not accept Udyog Aadhaar or the Registration under the Shop and Establishment Act and give preference to GST Registration over both. Therefore, you should first check with your banker on what are the documents which they need if your main purpose of registering is to open a bank account in your name.
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