Advantages and Disadvantages of Sole Proprietorship Registration

  • April 19, 2023
  • Dushyant Sharma
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Sole Proprietorship is one of the most common forms of business worldwide. As its name suggests, Proprietorship is a business in which a single person owns the assets and affairs of the business. In this article, we discuss the advantages as well as disadvantages of a Proprietorship Firm Registration in India.

Advantages of a Sole Proprietorship Registration

The following are some of the advantages of online Sole Proprietorship Registration in India:

Quick to Establish

A proprietorship business does not have any registration requirements. Also, the Proprietor’s legal identity is used by the sole Firm. Hence, a sole proprietorship can be started without any legitimate registration. Just by using the PAN and Aadhaar card,  the applicant can obtain the Udyog Aadhaar registration as well as the Trademark Registration. Trademark logo registration is necessary to protect the identity of the business.

Easier to run Business Operations

As a single person is responsible for everything, it is easier to operate as the Owner will be the sole decision maker. Also, the Owner does not need to consider the opinions of other stakeholders. In a Proprietorship, there is no concept of a board meeting. Neither does the Owner need approval from others in a proprietorship.

Profits attributed to the Single Owner

Only businesses such as Proprietorship and One Person Company entitles their Owner as the sole beneficiary of the earned profits. The Authority requires the involvement of a minimum of two stakeholders in other types of corporate entities like an LLP or a registered Company.

No Compliance & limited Taxation involved in a Proprietorship

Since a Sole Proprietorship Registration is not registered with any Government Authority, its compliance requirements are minimal, if not zero. Furthermore, the Owner alone has to file his ITRs if the registered Proprietorship Firm has an annual taxable income of more than 2.5 lakhs rupees. In the case of proprietors of age 60 years or more during the fiscal year, the applicant needs to file the Income Tax Return only if the annual taxable income is more than three lakh rupees. If the sole Proprietor has attained the age of 80 or more, he must file the income tax only if his annual taxable income is more than five lakh rupees.

Privacy can be maintained in a Proprietorship

Every Proprietorship is an unregistered entity. The Government maintains no database of a list of sole proprietorship registrations. Hence, proprietorships are more private when compared to other corporate entities whose details officials publish on the Ministry portal.


Disadvantages of Sole Proprietorship Registration

The following are the disadvantages that you must take into perspective while you are starting your business as a Sole Proprietorship:

Unlimited Liability

This scenario disturbs every aspect of Sole proprietorship registration. On loss occurrence, the Proprietor must meet the pending liabilities at any cost. If such a need occurs, the Owner’s personal assets may be at stake for discharging the liabilities.

Funds Arrangement from Banks

A proprietor cannot indulge in the sale of business shares. It deprives the Firm of the receipt of any funding. Further, banks are also wary of lending large sums to a proprietorship as its existence is tied solely to the Proprietor. On the other hand, in a registered company, more than one person is responsible for the liability. They ensure business continuity in the event of the death or insolvency of one of the stakeholders. It is easier for a Company or LLP to raise funds from the bank when compared to a proprietorship registration.

Tax Incidence is high in a Proprietorship

Proprietorships are taxed as an individual. Hence, the ITR rate for a proprietorship is based on tax slabs. Though the ITR rate for income of 10 lakhs rupees is lower when compared to a registered company, a proprietorship cannot enjoy government benefits like other corporate entities. Furthermore, for annual taxable income of more than 10 lakhs rupees, the ITR rate for a Sole Proprietorship is higher than the Company’s ITR rate. In the long run, it would be more prudent for the Proprietor to register himself as a company to reduce his tax liability.

To know more about sole proprietorship registration in India, connect with the legal experts at Registrationwala.


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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