The most common and simplest form of business is a sole proprietorship. Many small businesses operating in the India are sole proprietorships. An individual proprietor owns and manages the business and is responsible for all business transactions.
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Who is a sole proprietor?
As the name signifies sole proprietor is the natural person financing, managing and carrying out all related operations of his business solely. He runs his venture, bears all the risks and gains and becomes the masters of his business. He can adopt a trade name or business name which is other than his legal name to separate his personal connection.
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Generally the small businessmen prefer to enter into sole proprietorship. This is because:
It do not have any complexities involved
Owner is the sole earner of all the profits
Control is not diluted and stays in one hand only
Quick decision undertaking
Personal touch and thus customer satisfaction
Does sole proprietor have to register somewhere before starting a business? If no, then how can it start its business?
No there is no such legal act which lays down the procedure for a sole proprietor to get registered. Anyone can start his or her proprietorship business if one has got idea as well as funds. The commercial activity can be related to providing services or selling some goods. All you need is a place to start say a bay, shop or outlet or an empty room in your house if the commercial activity is allowed in your area.
What are the prerequisites of sole proprietorship business?
To start a sole proprietorship there are some things which one needs to possess along with ideas, funds and a business location which are:
Permanent Account Number of the person starting the business
Bank Account in trade name
Sales tax number called as Tax Identification Number (TIN) if the business is of selling taxable goods
Service Tax Registration number if the condition of exceeding the threshold limit is fulfilled
These things will give recognition to the business.
What are the business options available to sole proprietor?
A sole proprietor can:
start a outlet selling readymade goods
take up franchise of any known brand
provide services depending upon skills and qualification
be contractors or builders
initiate a little manufacturing factory
Describe some of the crucial features of sole proprietorship?
Unlimited liability: The sole proprietor has unlimited liability which means that his private assets can also be taken in account in case he fails to pay all the liabilities of his business. The personal house, jewellery, motor vehicles can be sold out if the dues are not cleared.
King of the business: The sole proprietor is the king of his own business. He manages all the operations, arranges for the desired funds, takes healthy decision in the interest of his business and is the beneficiary of all the gains and earnings.
No Separate Legal Entity: The sole proprietor and his business are regarded same in the eyes of law. Unlike companies there is no distinct identity.
Sole proprietor and income tax: The income tax also acknowledges the sole proprietor and his venture as same and therefore the income of the business is deemed as income of the person running the business and he is taxed at individual slab rates.
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Are you looking to do your Proprietorship Registration in Chennai? We at Kanakkupillai are at your service.
Why choose us to for your company registration ?
We give easy and cost effective services.
Flexibility to outsource a part of the service if your find the necessity.
We have experienced Charted accountants to take care of taxation needs.
Minimum requirement of client technical knowledge as we have specialists employed for all aspects of registering your company and getting it up and running.
We will make your business to GST Compliance. Returns are required to be filed digitally online through a common portal to be provided by GSTN
What are the Characteristics of Proprietorship ?
Ownership: As the sole proprietor, the business owner makes all business decisions. The owner controls and manages the proprietorship while creating and implementing changes. The sole proprietor may have several employees, but it is common for the sole proprietor to be the business’s only employee.
Unlimited Liability: As the sole owner of the business, the sole proprietor accepts complete responsibility for the business’s liabilities, as well as its income. The owner is financially responsible for the business’s debts, expenses and payables and creditors can garnish the sole proprietor’s personal income if the business falters or fails.
Risk: Since the sole proprietorship accepts all the risk, the proprietorship is often subject to less restrictive regulations than partnership and corporation entities. The sole proprietorship is not required to charter the business with the state, though the business may be required to register the business’s name and operations.
Easy Setup: Easy setup is one of the main characteristics of a sole proprietorship. Independent business entities, such as corporations and LLCs, must file business formation paperwork with a state agency before operating. Drafting the paperwork, filing it and receiving approval from the government can take weeks and cost Thousands of Rupees.
Easy Dissolution: Its dissolution is very simple because there are no legal restrictions required for its dissolutionand it can be dissolved at any time.
Management: By legal definition, a sole proprietorship can have only one owner. This characteristic means that the buck starts and stops with the owner. The sole proprietor does not have to answer to a board of directors or a business partner. There is no need to draft bylaws or a partnership agreement to control operations and management.
Flexibility: Sole proprietorship is very simple to change the nature of business according to change in market trends due to entire control and less resources. For example, a person who is doing the business of fast food may involve in the business of cloth at night.
Free from Legal Formalities: A sole trade business is not expected to meet any legal requirement. A sole trader may engage in any business unless license is required under law. Suppose, he wants to open a cloth shop or a grocery store, he will do it but if he wants to open a restaurant he will have to obtain a license before opening the same.
Secrecy: It is also an important characteristic of sole proprietorship. All the decisions are taken by the proprietor himself. He is in a position to keep his affairs to himself and maintain perfect secrecy in all matters.
What are the Documents required for Proprietorship Registration?
Get Certification from the Government after the approval.
How can someone set up a Sole Proprietorship business?
A Sole Proprietorship only involves the owner. Any income that the owner receives will need to be reported under the social security number for tax reasons. There is no special procedure that needs to be followed in order to open a Sole Proprietorship business.
What is a sole proprietorship?
A sole proprietorship is an unincorporated business that is owned by one person.
What are the liabilities of sole proprietors?
The sole proprietor is personally liable for financial debts of the business and any claims brought against the business to the full extent of his personal assets.
Do I need a lawyer to start a sole proprietorship or partnership?
There are no legal requirements for establishing a sole proprietorship or a partnership, other than to register the business name. It is always recommended to consult with a lawyer to ensure that you are structuring your business appropriately for your current and future business needs and that you are aware of all your legal obligations.
How is Soleproprietorship taxed?
The IRS sees the sole proprietor and the business as the same for income tax purposes. The sole proprietor pays income taxes on the profits of the business as though it were personal individual income.
Do I have to register my business name?
Yes, unless you are using your personal name as the name of a sole proprietorship.