Sole Proprietorship In India – A Quick Guide to Getting Started

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भारत में एकमात्र स्वामित्व स्थापित करने के बारे में जानने के लिए अपने फेसबुक या लिंक्डइन खाते से लॉगिन करें

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Let’s get right into it. A sole proprietorship may be the easiest firm to start. A proprietorship business and its proprietor legally represent a single entity under Indian law. Due to this, you would be taxed at individual rates instead of corporate. This greatly reduces tax procedures and allows you to file only one personal income tax return.

Here’s 4 things you can do to get starting your business and get it rolling!

 1. Registering a Sole Proprietorship

Your sole proprietorship can be registered at the nearest local municipal corporation office. Ensure that the Shops and Establishment Form is submitted. An undertaking is also required for submission. Registration fees may vary depending on your exact location.
Regarding the greater Mumbai municipal corporation area, links to the Shops and Establishment Registration form, undertaking and fee schedule are included below:
Lists regarding municipal ward offices in your city are available on your city’s municipal corporation’s website. Also note that during registration of your sole proprietorship, you are required to submit proof of address for the Shops and Establishments registration. If you plan to work from home, then your home address will suffice.

2. Business Licensing [restrict]

There are different registrations and licenses that are dependent upon your sole proprietorship’s requirements. Business owners should take note of the following.
  • The most common: Shops and Establishments Act: If you are dealing in physical retail and employment, you would need to register for this.
  • CST/VAT registration: If you plan to be selling goods under your sole proprietorship, then you will need to register for the appropriate CST or VAT license, depending on your state. Registration is applicable if your annual sales exceeds 5 lakhs.
  • Professional Tax: If you are hiring employees, then this professional taxation is compulsory. It would be wise to examine state guidelines to determine if this tax is mandatory in your state.
  • Service tax: Service tax is also compulsory for sole proprietorship if you are providing a service and annual sales exceeds 9 lakhs.

 3. Costs Involved

The great thing about running a sole proprietorship is that there are no additional costs. You are required to own a current account under your business’s name, but that’s all there really is. When registering for an account, ask the bank for a form of proprietorship firms and you’re all set. The only other consideration is that the bank may require a proof of address from you.

4. Taxes

Your personal Permanent Account Number (PAN) will suffice for sole proprietorship taxation purpose. Returns will also have to be filed under your name for Income Tax returns.
Corporate tax rates are not applicable as you are not considered a separate entity from your sole proprietorship. The process is incredibly simplistic individual tax rates are applicable.
If you are selling goods, then VAT, Excise and/or Sales Tax are required. If you are providing a service, then service tax is required. However, these taxes are only required if annual sales exceed 10 lakhs. Furthermore, Professional Tax is required if you employ staff under your sole proprietorship.
A final word of advice, avoid using common names for your sole proprietorship name, as you will be required to suffix India or your cities’ name at the end of it.

Actionable Takeaway: When deciding to embark on your entrepreneurial journey it’s vital that you are aware of the regulations regarding taxes and registrations, as these may differ depending on your state.

Now that your sole proprietorship is registered the next step is execution! The success of your business will depend on how well you’re able to lead yourself.

Find out here what habits some of the most successful entrepreneurs practice, and how you to can cultivate and incorporate these habits into your daily life.


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