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).