What is a Sole Proprietorship?
A sole proprietorship is one of the most common and oldest forms of business in India. It is a single-person establishment wherein an individual owns, manages, controls, implements, and executes his/her business on their own. It is also known as individual entrepreneurship, sole trader, or simply proprietorship.
A sole proprietorship does not require any registration but to gain tax benefits people do register their firm. Further, the trademark registration is recommended, in case the name of the business is unique or brandable.
In a sole proprietorship there is no separate legal entity between the sole proprietor and the business property. The liability of the sole member is unlimited which means when business profits are not sufficient for set off the losses of the business then the personal property of the sole owner should be used for setting off the losses.
Features of Sole Proprietorship Firm:
- One Person required as single entrepreneur.
- Single owner of the business.
- Easy to start and easy to close.
- Complete control.
- Nominal cost of formation and compliances
Advantages of Sole Proprietorships Firm:
- Easiest and cheapest way to start a business
- No sharing of profit
- Low capital required
- Full management control
- Few government rules and laws
Disadvantages of Sole Proprietorships Firm:
- Unlimited liability
- No perpetual succession
- Difficult to raise funds
Annual Compliances Required:
- File Income tax return
- TDS return filing
- GST returns
- Annual ROC filing
- Finalize financial statements
Documents required for Sole Proprietorship firm Registration:
- PAN card
- Name of business
- Current account in the name of proprietorship in bank
- Business address proof Bill required
- The license under Shop Act
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Note: This Post was last updated on January 28, 2023
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