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Proprietorship is a popular type of unregistered business entity owned, managed, and controlled by one person. Most of the micro and small businesses operating in the unorganized sectors prefer registering a Proprietorship.
Sole Proprietorship is simple to start and has very few regulatory compliance requirements for conducting the operation. Proprietorship registration is ideal for entrepreneurs who are getting into the business for small businesses with few clients.
A proprietor is the owner of the Sole Proprietorship business. It is not a corporate or legal entity. The proprietor and the Proprietorship are the same legal entity.
The PAN and other documents of the proprietor are the basis for obtaining all the registration and licenses. The proprietor is held personally liable in case of any liabilities in a business.
A Proprietorship business needs no registration. Therefore, it is one of the easiest to start with no formalities. However, after starting up the Proprietorship, it is relatively harder to open a bank account or obtain a payment gateway in the name of the business - since more registrations may be required.
Since the name of a Proprietorship is not registered, a Proprietorship can choose to have any name - as long as it does not infringe on a registered trademark. However, since the name is not registered, any other person can also use the same business name unless trademark registration is obtained.
A Proprietorship with less than Rs. 2 lakhs of income is not required to pay any income tax, as Proprietorships are taxed as the individual owing the business. However, once, income of the business exceeds Rs. 10 lakhs per annum, there are no major advantages for a Proprietorship in terms of taxation.
Ans: A proprietorship can be started with any amount of minimum capital.
Ans: Proprietorship firms do not have a Certificate of Incorporation.
Ans: Proprietorship firms are business entity that are owned, managed and controlled by one person. So Proprietorship firms cannot issue shares or have investors.
Ans: To open a bank account for a Proprietorship, Reserve Bank of India mandates that the proprietor provide two forms of registration for the Proprietorship along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: service tax registration, MSME registration, GST registration, shop & establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI Know Your Customer norms.
Ans: Yes, only one person is required to start a Proprietorship and a Proprietorship can have only one promoter.