Proprietorship Firm Registration

There is no specific law enforced for proprietorship firm as it is an unorganized business structure but we can register it under MSME (Micro Small Medium Establishments) development act of2006 of India Government. The registration formally known as Udyogaadhaar and now as Udyam.

Yes. The proprietor must be an Indian national. In the case of an Indian National and Resident of India no approval prior to commencement of business is required but in the case of NRI (Non Resident Indian) and POI (Person of Indian Origin) only can start a proprietorship firm only with prior approval from Government of India.

A proprietorship firm is run by an individual and since there is no certain rule to fix limit for investment, the proprietor himself can plan an amount that sufficient to start and run the business as capital. Proprietor have no limitation for invest further to expand the business but he should have to make sure that all legal compliances were met for the business.

To open bank account in the name of a proprietorship firm, Reserve Bank of India mandates that the proprietor need to provide any two forms of registration such as MSME (Udyam), Shop and Establishment Registration (from the local governance body), Trade License (D&O License from local governance body), GST Registration etc. along with identity proof, Address Proof and PAN Card of Proprietor.

As there is no registry or regulation for registering the name of proprietorship firm, it is advisable to ensure the exclusive rights of usage of business name by obtain Trade Mark Registration.

There is no separate identity for a proprietorship firm even after registration hence PAN card of the proprietor and the proprietorship remains the same. The assets and liabilities of a proprietorship firm also counted as the assets and liability of proprietor only.

The registered proprietorship business under MSME Development Act is only eligible for availing subsidies, incentives and schemes if any launched by Government of India.

Any business entity rather than trading as business activity are eligible for registering under MSME Development act. The businesses with trading activity can registered under shop and establishment act.

No. Proprietorship firms are meant to be formed and managed by a single person. If a proprietorship firm likes to invite investors/partners for expansion of business, then they can change the type of registration to Partnership Firm, Limited Liability Partnership or Private Limited Company etc.

Proprietorship firms have to file their annual tax returns with Income Tax Department. There is no separate income tax slab for proprietorship business, income from proprietorship business are counted as proprietor’s personal income and personal tax slab only applicable to the same. However proprietorship firms have to submit their annual reports or accounts with Ministry of Corporate Affairs, which is required for other types of entities like Limited Liability Partnership or Private Limited Company etc.

A proprietorship can be taken over by the company or LLP. However, the procedures for same are cumbersome, expensive and time-consuming. Therefore, it is wise for many entrepreneurs to consider starting the LLP or Company instead of a Proprietorship after consultation with experts.