What is a Sole Proprietorship Firm?
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss etc.
Sole proprietorship is the oldest form of business organization. It is also known by other names such as Single Proprietorship, Individual Proprietorship, Sole Trader Business etc. It is as old as civilization. It is the most Common form of organization for business on a small-scale. The sole proprietor or entrepreneur solely makes the investment, manages the business, enjoys the entire profit or bears the entire loss and exercises absolute control over the business.
Complete consultancy according to size and nature of proposed business. We will help you out in choosing the right department to register with.
- Scanned copy of PAN Card
- Scanned copy of Voter’s ID/Passport/Driver’s License
- Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
Frequently asked question:
1) What is a sole proprietorship?
A sole proprietorship is a company with only one owner and is not registered with the state, unlike a private limited company or corporation. Starting a sole proprietorship requires no paperwork all you do to create a sole proprietorship is simply go into business. Although you do not have to file paperwork to set up a sole proprietorship, you do still have to acquire business licenses and permits, just like with any other form of business.
2) How does a sole proprietorship differ from other company forms?
A sole proprietorship differs from other forms of business in several ways. The chief ways a sole proprietorship is different include:
- Sole proprietorships are the least complex and cheapest form of doing business
- Sole proprietorships require no formal paperwork to set up and don’t need to be registered with the state
- Sole proprietorships do not shield individuals from liability for their business debts
- Sole proprietorships are treated as simple income tax purpose, and do not need to have separate taxes prepared
3) How are sole proprietorships treated for tax purposes?
Unlike corporations, sole proprietorships are not treated separately . This means that any profit derived from your sole proprietorship is treated as your personal income and is accounted for an individual income tax return. Any such income is taxed according to provisions of Income Tax Act 1961, read with Income Tax Rules.
4) Am I personally liable for my business under a sole proprietorship?
Yes. Unlike other forms of incorporation, you are personally liable for any of your sole proprietorship’s debts or legal judgments against your business. This means that in order to satisfy debts owed by your business, debt collectors can come after your personal assets homes, cars, etc.
For this reason alone, you should be extremely cautious about setting up a sole proprietorship.
5) Who can start a proprietor firm?
Anybody can start a business of this form. There are no legal formalities for starting this form of business excepting in few cases where a license is to be obtained. In the eyes of law, there is no distinction between the business concern and the proprietor.