The Fundamentals Of The Power Of The Single
Single is tough. But it eventually matters. Because ultimately it is the singles that make all the difference. All the leaders take decisions mainly in their individual capacities. Various individuals have the capability to make decisions. And such people can go very far if their means and methods click.
The Importance Of Sole Proprietorship Firms
In businesses and commercial activities some people have the power and aptitude to make effective independent decisions. So here we will find the laws, rules and regulations of sole proprietorship firms.
Also know about One Person Company.
What is a Sole Proprietorship?
When a business is owned and governed by one person, it is called a sole proprietorship company. This type of business can be incorporated in fifteen days and hence makes it one of the most popular types of business to begin in the unsystematic sector, specifically among merchants and small traders. For a Sole Proprietorship business, registration is not required as it is identified through alternate registrations, such as GST registrations. However, its liability is unlimited and it also doesn’t have perpetual existence.
Who can opt for Sole Proprietorship?
Any person who wants to start a business with less investment can opt for this type of business form. It can be started in a time span of 10-15 days. Also, the control in the business is solely in your hands.
Advantages of Sole Proprietorship
The sole proprietorship business can be started easily by just one person. There is minimum compliance that is required to be adhered to get it incorporated. This form of business is economical as it is relatively less expensive to start than a company or LLP.
Control of the business
The sole proprietor will have complete control over the business. He will look after all the aspects of the business. Since only one person is running the business, secrecy can be maintained.
Quick decision making
The sole proprietor takes all decisions of the business. The decision making rests with a single person. Thus, the decisions can be taken quickly and immediately without the need for consulting anyone.
Disadvantages of Sole Proprietorship
There is an unlimited liability on the sole proprietor. He is personally liable for all the transactions he enters in the business. If any loss occurs, he will have to bear the whole loss out of his personal estate.
No perpetual succession
There is no perpetual succession which means it can come to an end if something happens to the sole person taking care of the business. It can shut down at any time. This makes the business unreliable and difficult to gain public trust for entering into agreements or contracts to expand the business.
Difficult to raise funds
Since a single person manages the business, it is not easy to raise capital. The capital of the business is from the investments put in by the sole proprietor. The sole proprietorship firm has no separate legal entity status from the owner. As it can come to an end at any time and there is no separate entity, it is difficult to obtain funds from third parties.
You may alsoi like to read about Partnership Firms.
Registration of Sole Proprietorship
The procedure for incorporating a sole proprietorship firm is-
Applying for PAN card.
After obtaining a PAN card, or if the proprietor already has a PAN card, the next step is to keep a name for the sole proprietorship business.
The next step is to open a bank account in the name of the business. All the transactions of the business will be through this bank account.
Though no specific registration is required for starting a sole proprietorship firm, certain basic registrations are required to be obtained by a sole proprietorship firm for doing business. The basic registrations required by a sole proprietorship are-
The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Act of the state in which the business is located.
The sole proprietorship should also register for GST if the business turnover exceeds Rs.20 lakh.
The sole proprietorship can also register as a Small and Medium Enterprise (SME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.
Documents Required for Sole Proprietorship
The documents required for registration of Sole Proprietorship are-
Registered Office proof.
Checklist required for Sole Proprietorship
PAN Card of the proprietor.
Name and address of the business.
Bank Account in the name of the business.
Registration under the Shop and Establishment Act of the respective state.
Registration under GST, if the business turnover exceeds Rs.20 lakhs.
What are the Compliances required? s
As a sole proprietor, you must file Income Tax Return annually. Also, you need to file your GST Return if you are registered under GST. A sole proprietor should also deduct TDS and file TDS return if liable for Tax Audit.
Also read Know about GST
Timelines for Sole Proprietorship Registration
The Sole Proprietorship requires opening a bank account in the name of the business, a Certificate of Registration under the Shop and Establishment Act of the respective state and GST Registration. The registration process takes approximately 10 days, subject to departmental approval and reverts from the respective department.