Sole Proprietorship
This is a business that is completely owned & controlled by a single person, There are no partners or directors in the business. Sole Proprietorship is not a separate legal entity from the business owner. The business owner has unlimited liability that means the owner is personally liable for all the debts & losses of the Sole Proprietorship. This type of business is suitable for those who just started their business and investment is very low and wants to work locally. However it has some drawbacks that it has no legal entity and no perpetual succession and unlimited liability. To run a business as sole proprietor some license and permits are required depening upon the nature of business, Industry, state and locality.
Benefits of Sole Proprietorship Registration in India
The following are the benefits of Sole Proprietorship in India:
- Ease of Dissolution: Just like it is easy to start a Sole Proprietorship in India, you can also easily dissolve, sell, or terminate the same because you aren’t required to fulfil any legal formalities like obtaining TDS. Moreover, you can easily sell the assets of the Sole Proprietorship Company or Firm to a person or an association.
- Very Less Compliance: This type of business can be started very easily by just a single person. There is minimum compliance that needs to be adhered to get it registered. This type of business is economical as it is very less expensive as compared to a Company or LLP.
- Sole Beneficiary of Profits: One of the main advantages of a Sole Proprietorship is that the owner of the proprietorship is entitled to all the profits getting from the business. Unlike other business structures in India where profits are shared among shareholders or partners, the Proprietor retains complete ownership.
- Quick Decision: In a Sole Proprietorship, the business owner takes all the decisions and there is no consent required for any other person or individual. Hence, an owner of a proprietorship can normally make quick decisions regarding their business affairs.
- Complete Control over the Business: The single owner of the Proprietorship will have complete control over the business. The owner will look after all the business aspects. Since only one person is controlling the business, confidentiality can be maintained.
Disadvantages/ Drawbacks Of Sole Proprietorship
- Unlimited Liability This is possibly the biggest disadvantage of sole proprietorship. It comes with unlimited liability. The sole member is personally liable for all the transactions. If any loss occurs, he will have to bear the whole loss out of his personal assets.
- No Perpetual Succession There is no perpetual succession which means it can come to an end if anything happens to the sole proprietor. It can dissolve, terminate upon disability or death of the owner. This makes the business unreliable and uncertain
- Difficulties in Raising Funds Since a single person manages the business, it is a difficult task to raise capital. The investment made into the business is by the owner himself. The sole proprietorship firm has no separate legal entity status from its owner. As it can come to an end at any time and there is no separate legal entity, it is difficult to secure funds from third parties
Documents Required for Sole Proprietorship Registration in India
Documents of the applicant
- PAN Card
- Identity Proof
- Address Proof
- Sale Deed or Rental Agreement (in case of Shop & Establishment Act Registration)
To open a current bank account, you need to submit the following documents
- Documents of the applicant
- Address Proof
- Identity Proof
- PAN Card
- Existence proof of your business
- Shop & Establishments Registration
