Sole Proprietorship

Sole Proprietorship is the easiest form of business done in India since it isn’t governed by any specific laws. Under sole proprietorship’s, the compliance’s are minimal and easy to fulfil. Sole Proprietorship means a business carried on by one person. The decision making and management of the business is in the hands of a single person. 

Aadhar Card

Aadhar number is now a necessity for applying for any registration in India. Also, the income tax return can only be filed if the person has linked his PAN card with the Aadhar number. Contact nearest E-Mitra or Aadhar Seva Kendra if you haven’t got an Aadhar number yet. After applying for an Aadhar card, a hard copy of the same is received at the registered address in around 15-20 days.

PAN Card

You can’t file your income tax return until you get a PAN. So if you don’t have a PAN number, apply for it at the earliest. PAN card can be applied online and it costs Rs. 110, approximately. For applying, you need a scanned photograph, identity proof, and address proof.

The form can be submitted online by verifying it through Aadhar e-KYC. Once the PAN card application is submitted, it is checked at NSDL for verification, and if NSDL finds the information correct, it allots the PAN number within 7-8 days. Further, a hard copy of the PAN card is received at the registered address within 15-20 days.

Bank Account

After you have got your Aadhar Number and PAN, you can visit any bank for opening an account with them. Apart from Aadhar Number and PAN, you need to carry identity proof and address proof. For opening a current account, you need to submit a GST registration document to the bank officials too.

Registered Office Proof

If it is a Rented Property: Rent agreement and NOC from a landlord.

If it is a Self-owned Property: Electricity bill or any utility bill or sale deed.

Registrations Required For A Sole Proprietorship

In addition to the above documents, there are few registrations required in order to establish the existence of the firm:

Registering as SME

You can get yourself registered as a Small and Medium Enterprise (SME) under the MSME Act. The application can be filed electronically. Although it isn’t compulsory to register as an SME, it is highly beneficial, especially at the time of taking a loan for the business. The Government runs various schemes for SMEs where loans are provided at the concessional rate of interest.

Shop and Establishment Act License

The Shops and Establishment Act License is required to be obtained according to the local laws. It is issued on the basis of the business and the number of employees. Generally, all sole proprietors who own a shop or establish a commercial establishment must obtain this license.

GST Registration

You can get yourself registered under GST if your annual turnover is more than Rs. 40 lakhs. Also, if you are doing online business (selling through amazon, Flipkart etc.), you are required to get a GST number. For registering under GST, you need the following documents –

· PAN card, photo and Aadhar Card of the proprietor

· Proof of business place (electricity bill/ rent agreement)

· Bank statement copy (first page for verifying bank account number, address and IFSC code)

· GST registration is easy and can be done via the GST portal. Normally GST number is received within 9-10 days of submitting the application.

Frequently Asked Questions

In whose name should the sole proprietorship firm PAN card be obtained?

The PAN card for the proprietorship firm will be in the name of the proprietor. The company PAN card is not issued to the sole proprietorship firm as it does not have a separate legal existence like a company. A sole proprietorship business is linked with the proprietor/business owner. Thus, the owner/proprietor can use his/her personal PAN for the sole proprietorship business. 

Should the bank account be in the name of the sole proprietorship firm?

Yes, a bank account must be opened by the sole proprietor in the name of his/her sole proprietorship business. A sole proprietor must open a current account and carry out all the proprietorship business transactions in the account of the sole proprietorship firm.

What are the documents required to open a bank account?

For opening a current account of the sole proprietorship, you must submit proof of sole proprietorship business and registered office address proof. A GST registration, MSME registration or a Shops and Establishment Act License acts as proof of the existence of the sole proprietorship firm.

If you do not have these registrations, you can submit any license/certificate issued for your sole proprietorship such as labour license, mandi license, police department permission/license, sales tax registration certificate, consent to operate document issued by the state/central pollution control board, gram panchayat certificate, importer-exporter code certificate, TAN/TIN certificate, etc. 

What is the registered office proof for an e-commerce/online business?

You can rent a place as an office for your e-commerce/online business. The rental agreement and NOC from the owner for operating your sole proprietorship business will be your registered office address proof. In case you operate your online/e-commerce business from home, your house address proof or the commercial electricity bill of your house will be the registered office address proof.

I have started a sole proprietorship business from my house? What is the registered office proof?

The registered office proof in such a case will be your house address. In case your house is rented, you will need to submit the rental agreement and NOC from the owner for operating your business from home as an office address proof. In case you start your sole proprietorship business from your own house, you can submit the commercial electricity or gas bill or delivery/dispatch receipts of goods or services issued to your customers containing your home address as proof of office address.

Which are the mandatory licenses to be obtained for a sole proprietorship?

Generally, it does not require any registration as such. The basic registrations required by a sole proprietorship are-

Registration Certificate under the Shops and Establishment Act of the state in which the business is located. 

GST registration.

MSME registration.

Is a GST license mandatory for a sole proprietorship?

If the sales or turnover of your business crosses the threshold limit of Rs.40 lakh in a year, then it is compulsory to get a GST registration done. However, businesses registered in special category states must obtain GST registration if their threshold limit crosses Rs.20 lakh. Any e-commerce seller on an e-commerce aggregator portal like Flipkart or Amazon needs to have a GST registration irrespective of their turnover. Any individual or entity thinking about establishing their own e-commerce business needs to have a GST Registration.