The sole proprietorship is the simplest form of business that one can operate. A lot of local businesses like grocery stores or even small manufacturers and traders can operate a sole proprietorship firm which makes it the most common and popular form of business structure.
A sole proprietorship is not a legal entity and the owner is the only person making the decisions to carry out the business operations and the only person earning profit. No one can interfere in the business activity and there are next to no compliances as there is no specific government law applicable to sole proprietorship registration in India.
If you want to get a sole proprietorship firm registered but don’t know where to start, this blog is just for you. You will get a detailed understanding of the registration process including a checklist of all the documents you need for the registration.
Documents required for sole proprietorship registration
- Aadhaar Card: A 12 digit unique number issued against all the residents of India irrespective of age and gender, Aadhaar card is an identity proof of an individual and the most important document for Indian residents. It is voluntary to enrol and obtain Aadhaar.
- PAN Card: PAN card is a 10 digit alphanumeric number issued by the income tax department. For a sole proprietor, it is mandatory to get a PAN card to file income tax returns for the business. Since the sole proprietorship is not a separate legal entity, the owner is liable for all the debts and personal assets of the company.
- Bank Account: A sole proprietor must open a bank account to carry out the business operations. A GST number is required for the same.
- Registered Office Proof: A registered office is required for opening a business. In the case of rented property, a rent agreement and NOC (No Objection Certification) is required from the landlord. For a self-owned office, an electricity bill, utility bill or sale deed is required as business proof.
The sole proprietorship registration in India is done under MSME, Shop and Establishment Act, and GST registration.
To get registered under the MSME Act, 2006, the Aadhaar number and PAN card are compulsory. All the proprietors qualified under the MSME can obtain Udaym registration under the MSME Act. Once the online MSME registration application is submitted to the Udyam portal, certification will be issued within 4-5 business days. The MSME has a lifetime certificate that doesn’t require any renewal. It can be cancelled only when the owner sends a notice to close the business. The notice must be sent to the registry within 15 days after the business is shut down.
Shop and Establishment Registration
As per the shop and establishment act, it is mandatory to obtain a license from the state government. This license is obtained from the Labour Department of respective states. It is slightly different from state to state, with some states providing lifetime validity, and others providing validity for one to five years.
It is the government proof that gives you authority to conduct business in a particular place and every sole proprietor who owns a shop or commercial establishment must have one. Under this act, shops are defined as places where the goods are sold by retailers and wholesalers. Commercial places like banking, trading or administrative work are considered commercial establishments. It also includes hotels, amusement places, restaurants, and theatres.
Factories and industries are not included in this act. Factories are regulated by The Factories Act, 1948 and The Industries (Development and Regulation) Act, 1951.
To acquire a shop and establishment certificate from the state government for sole proprietorship registration, copies of Aadhaar card, PAN card and registered address proof of business need to be submitted. The whole process can be carried out online. Once the application is submitted, the certificate is issued by the state government within 10-12 working days.
Goods or service tax number can be easily registered online on the GST portal. Below is a list of documents required for GST registration:
- Passport size photograph, copy of PAN card and Aadhaar card
- Electricity bill or rent agreement of the registered office
- The first page of the passbook to verify the bank account number, address and IFSC code.
Once the application is filed along with the required documents, the Goods and Service Tax Identification Number (GSTIN) is provided by the central government.
It also determines whether you are liable to pay GST or not. There are certain limits: If your turnover is more than ₹ 40 lakh annually, you must get registered under the GST. If you are conducting online business through Amazon or Flipkart, it is mandatory to have a GST number. You get the GSTIN number within 3-4 working days after filing the application for GST.
We hope this blog helps you with starting your business journey. MSME and Shop and Establishment registration can get you various business benefits. Also, GST registration is important if you cross the threshold limit, else it is considered to be an offence. It is much easier to keep track of these things if you hire experts for sole proprietorship registration in India. Contact LegalWiz.in now to hire experts and let us make your life much easier.