Proprietorship firm is a business entity where business is started and maintained by an individual and the person runs such a business is called proprietor for the said business. Most of the business in the infant stage is preferred to go with proprietorship registration considering the freedom for making decisions, lower tax rate, single handed operations, easiness of incorporation etc. There is no particular Act to regulate a Proprietorship, where legal compliances should be followed depends on the nature of business such as GST Registration, Trade License, and Food Safety License etc.
The proprietor has all the rights of operaons in a proprietorship firm and he/she neither need to report to anybody nor to take orders – simply freedom for making own decisions. Legal compliances are lesser in proprietorship firm compared with other incorporaons. Anyway your acvies are accountable like any other incorporaons, sll the Government interference will also very less for proprietorship firms.
The process of establish and register a proprietorship business is easy and cost effecve while compare with any other business structure. The proprietorship business runs on the identy and credibility of its proprietor, where a proprietor can run any legal business in his/her own name or a different legal names as his/her brands.
In a proprietorship business proprietor is the sole owner of the business hence he owns whole profit share. Proprietor himself can decide investment structure, markeng, staffing or any other administrave decisions related to the business and even decide when to withdraw profit or to reserve. All the business assets in a proprietorship business are belong to proprietor only.
In a proprietorship business, the business profit is considered as the income of proprietor hence personal income tax slab only applicable where as other business structures such as partnership, private limited company etc having higher rates of tax. The tax deduction benefits are added advantage with combined ITR for individual and business.
Identification plays an important role in making a business outstand in competitive market, build an unique and distinctive name for your business hence enhance your brand’s trust and value. Consumers should identify activity of your business from the brand name so that they can relate your business with its offerings.
Even though it meets all the above criteria, once again make sure that the brand name to be short, easy to remember and simple to pronounce or spell.
*Subjected to Government Processing Time
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.
