Proprietorship

Being the oldest and most common form of business structure, a sole proprietorship an ideal one for a small business. Since it is owned, operated and managed by a single individual, does not have a distinct status apart from the owner, and is neither a legal entity. Also known as a sole trader or simply a proprietorship, the owner receives all profits (after tax) and has unlimited responsibility for all losses and debts in this type of business. The decision making body is also that single individual and hence it has unlimited risk associated with it including the personal assets of the proprietor himself being at stake. 

 

How to set up a sole proprietorship firm

 

In India, there are no specific laws for registrating a sole proprietorship. A proprietor may use a trade name or business name other than his/her name. While selecting a name, it is advisable to select a unique name to avoid the potential infringement of an existing trademark.

Even though registration is not essential, the owner has to obtain the necessary licenses specific to his/her line of business such as Shops & Establishments, Professional Tax, Service Tax, VAT, IEC, etc. A sole proprietorship can be registered under the MSME Act to avail the benefits and protection under that act.

Technically, no registration is required to start a business under sole proprietorship. However, to open a bank account in the name of the firm, a minimum of 2 registrations such as Shops & Establishments, Professional Tax, Service Tax, MSME, etc. under the local, state or central authority is mandatory to comply with the Know Your Customer (KYC) norms of the bank.

A sole proprietorship is the oldest and most common form of business structure for a small business. A sole proprietorship is a business structure owned, operated and managed by a single individual.

 

Sole proprietorship firm is not a legal entity and does not have a distinct status than the owner.

 

A sole proprietorship is also known as a sole trader or simply a proprietorship. It is a business structure owned and run by a single individual and in which there is no legal distinction between the owner and the business. The identity of the organisation is nothing but the individual himself. The owner receives all profits (after tax) and has unlimited responsibility for all losses and debts.

 

He/she is the sole authority to take decisions, enjoy all profits of the firm and is personally liable for all losses of the firm. The proprietorship form business carries unlimited business risk, as the business proprietor is individually responsible to settle all business liabilities. The proprietor's personal assets are at risk to compensate for the business liabilities.

 

How to set up a sole proprietorship firm

 

In India, there are no specific laws for registrating a sole proprietorship. A proprietor may use a trade name or business name other than his/her name. While selecting a name, it is advisable to select a unique name to avoid the potential infringement of an existing trademark.

 

Even though registration is not essential, the owner has to obtain the necessary licenses specific to his/her line of business such as Shops & Establishments, Professional Tax, Service Tax, VAT, IEC, etc. A sole proprietorship can be registered under the MSME Act to avail the benefits and protection under that act.

 

Technically, no registration is required to start a business under sole proprietorship. However, to open a bank account in the name of the firm, a minimum of 2 registrations such as Shops & Establishments, Professional Tax, Service Tax, MSME, etc. under the local, state or central authority is mandatory to comply with the Know Your Customer (KYC) norms of the bank.