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A sole proprietorship is the simplest form of business structure that is owned, managed and controlled by the sole owner. The sole proprietorship is not a legal entity rather it just refers to a sole person who owns the business and is personally liable for its debts. This is one of the most popular forms of business structure for micro and small businesses operating in the unorganized sectors due to its simplicity ease information and nominal cost.
However, sole proprietorship is generally not suitable for the medium scaled and large scale businesses due to the array of disadvantages like unlimited liability, no separate legal entity, non-transferability and limited life of the business.
The government of India has not prescribed any mechanism for the registration of sole proprietorship firm. Thus, the registration of a proprietorship can only be recognized through tax registrations that the business is required to have as per the rules and regulations. These tax registrations may include GST Registration that must be obtained in the name of the Proprietor to establish that the Proprietor is operating a business as a sole proprietorship.
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In regard to the Sole Proprietorship Registration, following documents are needed:
You can start a sole proprietorship firm if you are an Indian citizen with a current account in the name of your business.
The procedure of registration of sole proprietorship is quite simple and less time-consuming. Thus a sole proprietorship business does not take more than 15 days to open up and get running.
The legal identity of sole proprietorship and is the owner is considered as one under the Indian tax laws. Due to this the profits and loss of the business are considered as the profits and losses of the individual. Thus the tax provisions for sole proprietorship frim are completely similar to the tax provisions of the individual.
No, it is not mandatory for sole proprietorship firm to obtain registration as the government of India has not made any mechanism for it. The registration for this form of business can be obtained by acquiring certain tax registration in the name of the sole proprietorship firm.
The liabilities of the sole proprietors are unlimited as they and their sole proprietorship firm is considered as single entity thus the sole proprietors are personally liable to clear the liabilities of the company.
Sole proprietorship firm is the most suitable form of business structure for unorganized sectors. Due to the simplicity, ease of formation and nominal cost it is mostly preferred by micro and small scaled business forms.
The sole proprietorship is the easiest and least expensive type of business to start. Moreover, the sole proprietors can enjoy the sole control over the working of the company.
In order to open a current account, you need proof of the existence of your business. For the existence of the business, you can submit Shops & Establishments Act Registration. In addition, you will need a PAN card and address and identity proofs.
Yes, you can definitely convert your sole proprietorship firm into the private limited company by following a specified procedure.
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