Proprietorship Registration
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A sole proprietorship firm is the simplest form of business owned and controlled by a single individual. The owner of the proprietorship firm is known as the proprietor. The proprietor alone invests the entire capital and is thus entitled to all the sole proprietorship’s income. The liability of a sole proprietor is personal and unlimited. This indicates that the proprietor is liable to pay off all liabilities from his pocket if such a need arises.

Any person who is over 18 years, capable of entering into a lawful contract is eligible to start a proprietorship. The option to create a proprietorship is available to Indian Citizens only. However, NRIs and OCIs are permitted to establish proprietorship firms and invest only on a non-repatriation basis.

A proprietorship business can be started with any amount of capital, as there is no prescribed limit for it. The proprietor must infuse the capital into the proprietorship based on the nature and scale of its business activities. He can introduce or withdraw capital at any time from the accounts of the proprietorship business as drawings.

The Reserve Bank of India regulates the opening of bank accounts of proprietorship businesses. It has prescribed the submission of at least two proofs of identity of the proprietorship in order to open its bank account. To open a bank account for the business, you can approach any bank near you. Submit the prescribed application form along with the necessary supporting documents. Please click here to read our article on the list of required documents for the proprietorship firms’ opening bank accounts.

Yes, proprietorship businesses can be converted to LLPs or Private Limited Companies. However, the conversion process is complicated, and we do not recommend it unless it is necessary.

Proprietorships do not have a separate legal identity and, hence, are not treated separately for income tax purposes. This means that any profit derived from a sole proprietorship is treated as the income of the proprietor. It is accounted for on the tax returns filed by the proprietor. The business income shall be shown as separate income in the proprietor’s income tax return.

Yes. Unlike other incorporated business forms, the proprietor’s liability towards his sole proprietorship is unlimited. This means that debts and losses accumulated by the business shall be paid off using the proprietor’s personal assets.

Since a formal Sole Proprietorship registration is not required, the fee depends on the other tax and regulatory registrations. These include the MSME registration fee, the GST registration fee, and the Shops Act registration fee.