How to Start and Operate A Sole Proprietorship in India?

Business can be all fun and a smooth cash flow if done right. It is the same with a sole proprietorship.  A sole proprietorship business refers to an enterprise based on individual proprietorship or entrepreneurship owned and run by a single individual.

In India, it is regarded as the oldest type of business. Having total knowledge about the business will help you build a better foundation.  If you are thinking of starting a sole proprietorship in India, you need to know some basic rules, tips and ways to do it. Hence, it is essential to do your homework. This is where this article will help you out.

What is Proprietorship?

If you are one of those who hardly have a clear idea of this topic, then you must not fear. No matter how technical the term proprietorship may sound, but its meaning is as clear as water. You can easily understand what a proprietorship is.

Here we will discuss the fundamentals to put forth a clear idea about what is a proprietorship and how to establish it as a profitable venture. Hopefully, this will help in initiating a business under the sole proprietorship category.

A sole proprietorship is also referred to as a sole trader. The businesses are unincorporated and have only one owner. That single owner is also responsible for paying personal income tax on the business’s profits.

The amount of government regulation is very less when it comes to a sole proprietorship. This characteristic also makes it one of the easiest types of business, an option without plenty of complexities. The business’s convenience has helped it earn its fame prominence among sole business owners, individual consultants and contractors and more.

It would help if you got clear that they are way different from corporations, LLCs and LLPs. No separate legal entity is neither created nor required. You will be free of the liability of a legal entity at every cost. Your business will be devoid of any taxation as well. Proprietorship can be an excellent idea to start a business.

Types of Sole Proprietorship Businesses

In India, a lot of businesses can act as sole proprietorships. These types of businesses include grocery, retails, and whatnot. This includes small as well as large businesses. Proprietorship can also be a home-based business. There are amazing new business ideas that you can explore if you are willing to start a sole proprietorship. Any freelancer, be it in any field from photography to writing, not considering it as a hobby but a means of making money, is operating a sole proprietorship. Even home-based accounting and consulting firms also come under this category. The idea of a sole proprietorship is quite easy to understand and easier to execute. It can also be the best business idea.

How to Start Your Own Business or Sole Proprietorship?

One of the easiest kinds of business that you can start with is a sole proprietorship. You will barely need a tutorial to go through on how to start your own business. You can turn your hobby into your business, and it will be considered as a sole proprietorship. But in case you want to make it a bit formal, you may need to go through some procedures. No need to be scared, these are nothing different than normal business but without legal liabilities and taxation of any kind.

Here are some things you need to keep in mind while you are searching for how to start your own business –

1.      Decide what will be your business type.

2.      Decide a name for your business.

3.      Make a current account with any bank of your preference.

4.      Go through registration processes as required.

If executed properly, it can be one of the best online business ideas.

How Will You Register for Sole Proprietorship in India?

You might have to register your business even when it is a sole proprietorship in India. It is not a requirement but will help to run your business smoothly. You can make an SME registration, GST registration and shops & establishment registration for your sole proprietorship business –

1. SME Registration

You can choose to register your sole proprietorship firm under an SME or Small and Medium Enterprise. You might need to go through the provisions curated in the MSME Act. Apply for this registration online. SME registration is not a mandatory one. But, it is recommended to register under SME to start a business. Getting registered under SME will get you too many benefits from easier bank loans. You will also be able to avail several schemes announced and drafted by the government. You may even avail of bank loans with some low-interest rates.

2. GST Registration

This is an important registration that you might have to make. You will be charged GST at all times during sales. GST is placed in multiple indirect taxes, including service tax, central sales tax, excise duty, additional customs duty, Value Added Tax (VAT), and many more. If you are going to have a yearly turnover of 20 lakhs or more and might have an interstate supply of goods or services, you must get a GST Registration for your business.

Your business might be legally recognised, but small businesses can benefit from the composition scheme curated by the GST regime, which will lessen the taxes. Hence your taxation will be reduced.

Shops & Establishment Registration

If you have come up with a new business idea and it requires you to get a shop, you might have to get a shop and establishment registration. This registration includes multiple business entities – restaurants, shops, commercial establishments, benefit making organisations, retail business/trade and many more. You will need to get the establishment registered under this category within 340 days of it being functional or non-functional.

You might get it done from the local municipality, depending on the number of employees you have. Obtaining the license will give you the right to do business smoothly. You will easily be able to open any current account with shops and establishment registration. This will also lead you to avail schemes drafted by the State DIC Department.

The Pros and Cons of a Sole Proprietorship

If you want complete control over your business, a sole proprietorship can be the best business idea. It will put you in control of almost everything and anything related to your business. But, like any other business, this too has some merits and demerits of its own that you might want to learn about. Here are the pros and cons of sole proprietorship –

1. Pros

• The business will be smooth and quick.
• You will be in charge of making all business operation calls.
• Almost no restriction and few forms to fill.
• No need to make a balance sheet for a business.
• No need to file a separate tax return.
• You will be in control of all the money.
• Easily make decisions and changes as you will be head of management.

2. Cons

• The responsibility of making changes and decisions can be too much to take at times.
• It will be less professional than an LLC or Corporation.
• The business can be terminated with heavy loss, death, physical loss of the owner.
• You will be responsible for obligations and debts. The liability will include all your assets.
• You may need insurance coverage for the liability.
• You may face difficulty in collecting operating cash or finances.

Closing Thoughts

You can go through the requirement in this article to do your research and homework in this business. It is sure to help you.

Also read:

1) Business Success Tips Every Business Owner Should Know
2) What are the best businesses in India to start from home?
3) Green Business Ideas for Startup Entrepreneurs
4) Top-5 Startup & Business Ideas for Indian villages
5) OkCredit: All you need to know about OkCredit & how it works.

FAQs

Q. Can anyone start a sole proprietorship?

Ans. Yes, with the right knowledge of proprietorship, anyone can easily start their business as a sole proprietor. These businesses can take off with minimum capital.

Q. Is registering the business required?

Ans. You may or may not require to register the business, and this will completely depend on the criteria mentioned above. However, the essence of a sole proprietorship is not to register the business.

Q. Are these types of businesses easy to establish?

Ans. The sole proprietorship is among many other businesses that are easy to establish; hence you will notice they are the most common in India.

Q. Will there be just one owner?

Ans. Yes, you will be the sole owner of this sort of business.