Sole proprietorship
A Sole Proprietorship is the simplest and most commonly used business structure in India. It is owned and managed by a single individual, making it an ideal option for freelancers, traders, and small business owners. There is no formal registration required under a separate Act, but it can be recognized through tax and business licenses like GST Registration or a Shop & Establishment Certificate.
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Benefits of a Sole Proprietorship
Easy to Start: Minimal legal formalities make it the easiest form of business to set up.
Low Compliance: No need to file separate business returns; income is taxed as the individual’s personal income.
Full Control: The proprietor has complete decision-making authority.
Cost-Effective: No registration fees, company filings, or statutory audits (unless under specific tax limits).
Quick Registration through Licenses: Can be established using GST, MSME, or Shop & Establishment registration.
Eligibility Criteria
Must be a resident Indian citizen.
Owner should be 18 years or older and legally competent to contract.
A valid PAN card, Aadhaar card, and business address are required.
Business name should not infringe on trademarks or existing business names.
Registration Process
Choose Business Name: Select a unique name for the business.
Obtain PAN (if not already available): The owner’s PAN is used for taxation.
Business Registrations:
GST Registration (if turnover exceeds threshold or required by trade)
Shop & Establishment License
Udyam (MSME) Registration (for micro, small enterprises)
Open a Current Bank Account: Using PAN, address proof, and registration/license documents.
Documents Required
PAN and Aadhaar of the proprietor
Passport-size photo
Proof of business address (utility bill, rent agreement, NOC)
Bank statement or cancelled cheque
GST/Shop Act/MSME registration certificate (as applicable)
Compliance Requirements
GST Returns: Monthly or quarterly returns (if GST registered).
Income Tax Filing: ITR-3 or ITR-4 based on turnover and presumptive taxation scheme.
TDS and Other Taxation: Applicable only if thresholds are met.
No Separate Audit: Audit is only applicable if turnover exceeds ₹1 crore (non-digital) or ₹10 crore (digital transactions).
Frequently Asked Questions
No, it is not mandatory—but you will need GST, MSME, or other licenses to operate formally.
Yes, it can be converted into an LLP or Private Limited Company with proper documentation.
No, the business is not a separate legal entity. The proprietor’s PAN is used.
Audit is required only if turnover exceeds the prescribed limits under the Income Tax Act.
Yes, a sole proprietor can hire staff just like any other business.
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