Proprietorship Company Registration
A company registration sole proprietorship is one of the oldest and easiest Business Structures to start in India. A proprietorship is a type of business that is owned, managed, and controlled by one person – who is the proprietor. As the proprietorship and proprietor are one and the same, it is very easy to start and there are very minimal compliance requirements.
As the proprietor and the business are one and the same, a proprietorship cannot have other partners or shareholders. Further, there is no limited liability protection for the proprietor from the business activities conducted in the sole proprietorship. Hence, this type of business entity is best suited for every small business with no more than 5 employees.
Who is a sole proprietor?
A company registration sole proprietor is the sole owner of the proprietorship business. Hence, a business will be carried forward by making a new bank account for the business, and GST registration will be done by using the PAN and Aadhar of the proprietor. The proprietor is completely responsible for all the assets and liabilities of the business.
How to check proprietorship status?
In company registration India, we don’t have to register a sole proprietorship. Hence, there is no platform to check the status of a sole proprietorship. However, if a proprietor has applied for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to confirm the existence of the proprietorship.
Proprietorship legal entity status and recognition
There is no separate recognition of proprietorship as a separate legal entity. Hence, the business owner and the proprietorship are considered one and the same for all legal and official purposes.
Sole Proprietorship Registrations & Licenses
To company registration run a proprietorship business in India, the proprietor will have to obtain PAN and Aadhar. The proprietor must obtain GST registration, and UDYAM registration, and open a bank current account. In some states, the proprietor will also have to obtain Shops & Establishment Act registration.
In addition to the basic requirements above, additional licenses and permits may be required depending on the industry, state, and local regulations.
Advantages of Proprietorship
Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process – as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.
Lower compliance: As most proprietorships are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLPs or Companies are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.
Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.
Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.
Complete control: A sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses, and all business operations.
Disadvantages of Sole Proprietorship
Funding: This type of business structure relies solely on one person’s savings, borrowings, and credit history. As there are no other persons involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible – as this type of business entity does not allow for-profit sharing or shareholding.
Personal liability: If a proprietor is unable to pay business loans or taxes, in a proprietorship – the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure – the proprietor will be held personally liable until all the liabilities are extinguished.
Business continuity: In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there will be no business continuity.
Growth: A proprietorship has various restrictions in terms of fundraising, liability, and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietors.
Unincorporated business: Sole proprietorships are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized businesses.
Registering a Proprietorship Online through IndiaFilings
Your company registration can easily register a proprietorship online through IndiaFilings. To register a proprietorship, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:
- GST Registration
- UDYAM Registration
- Zero-Balance Business Current Account with LEDGERS Accounting Software
Once, you have registered for the proprietorship registration on IndiaFilings, please follow the steps below and upload the following documents by logging into LEDGERS.
- Step 1: Log in to LEDGERS using the email address for payment.
- Step 2: Go to Services Tab & Select Proprietorship Engagement
- Step 3: Upload your PAN & Aadhar Card Copy
- Step 4: An IndiaFilings Registration Expert will file the registration application with GST Department, MSME Department, and Bank for Current Account.
- Step 5: Access to LEDGERS Accounting Software is provided for GST invoicing, GST filing, and other services.
PAN Card for Proprietorship Firm
A company registration proprietorship is not a separate business entity. Hence, there is no procedure to obtain a proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.
Obtaining GST Registration for Proprietorship
GST registration for a proprietorship will be obtained by IndiaFilings as a part of the service. The following documents are required for GST registration:
- Permanent Account Number (PAN) of the Proprietor
- Digital Signature Certificate of the Authorized Signatory
- Consent by Proprietor for obtaining GST Registration
- Photograph of Proprietor and Authorized Signatory
- Bank Account Details: A scanned copy of a canceled cheque with the business entity’s name, bank account number, MICR, IFSC, and branch information.
- Declaration / Authorization to Authorized Signatory
- For commercial purposes, the rent/lease agreement should be in the name of the proprietor.
- Additional documents such as an Aadhaar Card, Driving Licence, Passport, or Voter ID in the name of the Owner with the complete address of the premises should also be provided if the address on the ownership document (Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill) is incomplete.
Obtaining UDYAM Registration for Proprietorship
Udyam Registration can be obtained online to avail various benefits available for small and medium-sized businesses. Once the GST registration is obtained, the IndiaFilings team would help obtain UDYAM registration by submitting an Aadhaar card, PAN card, and GST certificate to Government.
Bank Account for Proprietorship
The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof of doing business. Any two of the following documents can be submitted to create a current account instead of a savings account in the name of proprietorship:
- GST registration certificate
- Shop & Establishment Act license
- License issued by the Registering authority like Certificate of Practice issued by the Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities,
- Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account etc.
Obtaining Shops & Establishment Act License for Proprietorship
From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-3 weeks.
Timelines for Sole Proprietorship Registration
A sole proprietorship can normally be registered in India through IndiaFilings in less than 15 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.
Proprietorship Business Activities
A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defense, and telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, the proprietorship business structure only works for business activities that are small-scale in nature.
Compliances for Proprietorship
The following are some of the compliances that are applicable for a sole proprietorship:
Income Tax Filing: The business owner of a proprietorship will have to file a personal income tax return using the form ITR-3 or ITR-4.
Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file from ITR-3 or ITR-4 to be compliant with the income tax regulations.
GST Return Filing: If a proprietorship has GST registration, GST returns must be filed every month and quarter as per the scheme under which the business is registered.
TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold – tax must be deducted at source and TDS returns must be filed every quarter.
In addition to the above, various other compliance requirements may be applicable to the proprietorship based on industry and location.
Proprietorship vs Limited Liability Partnership (LLP) vs Company
|Definition||Unregistered type of business entity managed by one single person||A formal agreement between two or more parties to manage and operate a business||A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company.||Registered type of entity with limited liability to the owners and shareholders|
|Ownership||Sole Ownership||Min 2 PartnersMax 50 Partners||Designated Partners||Min 2 DirectorsMin 2 ShareholdersMax 15 DirectorsMax 200 ShareholdersFor One Person Company1 Director1 Nominee Director|
|Registration Time||7-9 working days|
|Promoter Liability||Unlimited Liability||Limited Liability|
|Documentation||MSMEGST Registration||Partnership Deed||LLP DeedIncorporation Certificate||MOAAOAIncorporation Certificate|
|Governance||–||Under Partnership Act||LLP Act, 2008||Under Companies Act,2013|
|Transferability||Non Transferable||Transferable if registered under ROF||Transferable|
|Compliance Requirements||Income tax filing if turnover is more than Rs.2.5 lakhs||ITR 5||Form 11Form 8ITR 5||ITR 6MCA filingAuditor’sappointment|
What is meant by a proprietorship firm?
A proprietorship firm is a type of business structure where a single individual owns and manages the entire business. The proprietor is personally liable for all the debts and obligations of the firm. Proprietorship firms are easy to set up and operate, making them a popular choice for small businesses and startups in India.
What are the types of proprietorship?
There are mainly four types of proprietorship in India:
- Sole Proprietorship
- One Person Company (OPC)
- Registered Proprietorship
- Unregistered Proprietorship
Each type of proprietorship has its advantages and disadvantages, and the choice of the business structure depends on the proprietor’s needs, goals, and resources.
What is the difference between a proprietorship and a firm?
Proprietorship and firm are often used interchangeably, but there is a subtle difference between the two. Proprietorship refers to a type of business structure where a single individual owns and manages the entire business, while a firm refers to a group of individuals who come together to carry out a business activity. In a firm, the ownership is shared among the partners, and the profits and losses are also shared among them. In contrast, in a proprietorship, the proprietor has complete control over the business, and all the profits and losses belong to the proprietor alone.
Is there any certificate of Incorporation?
No, there is no certificate of Incorporation given.
Are there any compliances for the sole proprietorship?
As the sole proprietorship and the proprietor are the same the individual has to just file the Income-tax returns and GST returns filing for the proprietorship firm.
Is there any minimum requirement to start a sole proprietorship?
No, there is no minimum requirement to start a sole proprietorship in India.
How long does the sole proprietorship exist?
Sole proprietorships exist as long as the proprietor is alive and is desiring to run the business.
Is the owner of the sole proprietorship considered to be the same as the sole proprietor?
Yes, a sole proprietor is considered to be the same as the sole proprietor.
What are the licenses required for proprietorship registration?
It generally differs from state to state as in Maharashtra a Shop and Act license is required and for West Bengal, the trade license is required.
What is the role of the proprietor in sole proprietorship?
The proprietor owns, controls, and manages the sole proprietorships. He has a complete hold over the proprietorship.
Startup Registration India – 7 Steps to Register Your Startup
Startups are booming in India. The government is also supporting young entrepreneurs to establish startups. Startups help to boost the country’s economy. A startup is a business that offers innovative products or services that provide solutions to a problem existing in society. A startup may also redevelop a current product or service into something better.
The Government of India, under the leadership of PM Narendra Modi, has started and promoted the Startup India initiative to develop the Indian economy, recognize and promote startups and attract talented entrepreneurs.
Steps to Register Your Startup With Startup India
Step 1: Incorporate your Business
You must first incorporate your business as a Private Limited Company or a Partnership firm or a Limited Liability Partnership. You have to follow all the normal procedures for registration of any business like submitting the registration application and obtaining the Certificate of Incorporation/Partnership registration.
You can incorporate a Private Limited Company or a Limited Liability Partnership (LLP) by filing the registration application to the Registrar of Companies (ROC) of your region. You can establish a Partnership Firm by filing the application for registration of your firm with the Registrar of Firms of your area. You need to submit the required documents and fees to the Registrar of Companies or Registrar of Firms along with the registration application.
Step 2: Register with Startup India
Then the business must be registered as a startup. The entire process is simple and online. Visit the Startup India website and click on the ‘Register’ button as shown below.
Enter your name, email ID, mobile number, and password, and click on the ‘Register’ button.
Next, enter the OTP which is sent to your email, and other details like the type of user, name, stage of the startup, etc, and click on the ‘Submit’ button. After entering these details, the Startup India profile is created.
Once, your profile is created on the website, startups can apply for various acceleration, incubator/mentorship programs, and other challenges on the website along with getting access to resources like Learning and Development Programs, Government Schemes, State policies for Startups, and pro-bono services.
Step 3: Get DPIIT Recognition
The next step after creating the profile on the Startup India Website is to avail of the Department for Promotion of Industry and Internal Trade (DPIIT) Recognition. This recognition helps the startups to avail benefits like access to high-quality intellectual property services and resources, relaxation in public procurement norms, self-certification under labor and environment laws, easy winding of company, access to Fund of Funds, tax exemption for 3 consecutive years and tax exemption on investment above fair market value.
For getting DPIIT Recognition, log in with your registered profile (account) credentials on the Startup India website and click on the ‘Apply for DPIIT Recognition’ option under the ‘Recognition’ tab.
On the next page, click on ‘Apply as Company or LLP’ or ‘Apply as Partnership Firm’. When clicking on the ‘Apply for Company or LLP’ button, it will redirect to the National Single Window System (NSWS) website. Companies and LLPs should register on the NSWS website and add the form ‘Registration as a Startup’ to get DPIIT recognition.
The ‘Startup Recognition Form page is shown below.
Step 4: Recognition Application
On the ‘Startup Recognition Form’, you need to fill in the details such as the entity details, full address (office), authorized representative details, directors/partner details, information required, startup activities, and self-certification. Click on the plus sign on the right-hand side of the form and enter each section of the form.
After entering all the sections of the ‘Startup Recognition Form’, accept the terms and conditions and click on the ‘Submit’ button.
Step 5: Documents for Registration
- Incorporation/Registration Certificate of your startup
- Proof of funding, if any
- Authorization letter of the authorized representative of the company, LLP, or partnership firm
- Proof of concept like pitch deck/website link/video (in case of a validation/ early traction/scaling stage startup)
- Patent and trademark details, if any
- List of awards or certificates of recognition, if any
- PAN Number
Step 6: Recognition Number
That’s it! company registration On applying you will get a recognition number for your startup. The certificate of recognition will be issued after company registration and the examination of all your documents which is usually done within 2 days of submitting the details online.
However, for company registration be careful while uploading the documents. If on subsequent verification, it is found to be obtained that the required document is not uploaded/the wrong document uploaded or a forged document has been uploaded then you shall be liable to a fine of 50% of your paid-up capital of the startup with a minimum fine of Rs. 25,000.
Step 7: Other Areas
Patents company registration, trademarks, and/or design registration: If you need a patent for your innovation or a trademark for your business, you can easily approach any from the list of facilitators issued by the government. You will need to bear only the statutory fees thus getting an 80% reduction in fees.
Funding: One company registration of the key challenges faced by many startups has been accessing finance. Due to a lack of experience, security, or existing cash flows, entrepreneurs fail to attract investors. Besides, the high-risk nature of startups, as a significant percentage fail to take off, puts off many investors.
In company registration order to provide funding support, the Government has set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a period of 4 years (i.e. INR 2,500 crore per year). The Fund is in the nature of a Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of SEBI-registered Venture Funds.
Self-company registration Certification Under Employment and Labour Laws: Startups can self-certify under labor company registration laws and environmental laws so that their compliance costs are reduced. Self-certification is provided to reduce regulatory burden thereby allowing them to focus on their core business. Startups are allowed to self-certify their compliances under six labor laws and three environment laws for a period of 3 to 5 years from the date of incorporation.
Unit company registration operating under 36 white category industries as published on the website of the Central Pollution Control Board does not require clearance under 3 environment-related Acts for 3 years.
Tax Exemption: Startup company registration is exempted from income tax for 3 years. But to avail of these benefits, they must be certified by the Inter-Ministerial Board (IMB). The Startups incorporated on or after 1st April 2016 can apply for the income tax exemption.
Need Government recognition for your Startup?
Startup company registration in India helps you to enjoy benefits from the government
Key Features of the Fund of Funds
- The company registration Fund of Funds shall be managed by the Small Industries Development Bank of India (SIDBI)
- Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds
- The company registration Fund of Funds shall contribute to a maximum of 50% of the SEBI registered Venture Funds (“daughter funds”). In order to be able to receive the contribution, the daughter fund should have already raised the balance by 50%. The Fund of Funds shall have representatives on the board of the venture fund based on the contribution made.
- The company registration Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.
It’s very easy to register as a startup thanks to the various government initiatives. However, you can focus on your key area while we at ClearTax help you from start to finish right from incorporating your company to getting your startup recognition. Do visit our website to know more about startup services.
Frequently Asked Questions on Startup Registration India
Who can register with Startup India?
A company registration entity incorporated as a Private Limited Company, Partnership Firm, or Limited Liability Partnership can register itself under the Startup India scheme. The annual turnover of these business entities should not exceed Rs.100 crores, and they should have been in existence for up to ten years from the date of their incorporation/ registration. Such an entity should be working towards innovation, development, or improvement of products or services, or processes.
What are the benefits of signing up with Startup India?
There are a number of benefits startups receive under the Startup India Initiative. Nevertheless, in order to avail of these benefits, an entity is needed to be recognized by the DPIIT as a startup.
Startups are allowed to self-certify their compliance with six labor laws and three environmental laws. This is allowed for a total period of five years from the date of incorporation/registration of the entity. Startups are allowed a three-year tax exemption and the best intellectual property services and resources are solely built to help startups protect and commercialize their IPRs.
What kind of business structure should I choose for my startup?
The most preferred business structures for a startup are Private Limited companies and LLPs. A Private Limited company is legally recognized and generally favored by investors. However, it has stricter compliance and may have a higher cost of incorporation.
Whereas incorporation cost is lower for LLPs and they tend to have relaxed compliance in comparison to the Private Limited Companies. In addition to that, LLPs have limited liabilities and are equally recognized by investors all over the world.
What can I do to attract investors to a start-up?
To attract investors, not only do you need a stellar product with a scalable model, but you also need visibility. Make sure that your product receives healthy engagement and traction. You’ll need to register your startup on Startup India and proactively seek out investors. Make sure you are able to effectively communicate your business idea to the investor and the sustainability of your business model.
Can a foreign company register under the Startup India hub?
Any entity that has at least one registered office in India can register itself on the hub, since the location preferences, for the time being, are only created for Indian states. However, soon the government hopes to start registrations for stakeholders from the global ecosystem too.
What is the difference between an accelerator and an incubator?
Startup incubators are typically institutions that help entrepreneurs by developing their businesses, especially in the initial stages. The incubation function is usually carried out by institutions that have experience in the business and the tech world.
Startup accelerators support early-stage, growth-driven companies. These programs usually have a timeframe in which individual companies spend anywhere between a few weeks and a few months working with a group of mentors who are educated and may also provide financial help.
For how long is a company recognized as a startup?
Any business entity that has completed 10 years from the date of its incorporation/registration, and has exceeded the previous year’s turnover of Rs.100 crores shall stop being a startup on completion of 10 years from the date of its registration/incorporation.
Can an existing entity register itself as a “Startup” on the Startup India Portal?
Yes, as per the law an existing entity can register itself as a startup, provided that it meets the prescribed criteria for a startup. They will also be able to avail various tax and IPR benefits that are available to startups. The criteria are the same as those mentioned in the article above.
How do I know my registration is complete?
Once the application is complete, and the startup gets recognized, you will receive a system-generated certificate of recognition. You will be able to download this certificate from the Startup India portal.
Does a startup need to be registered in India?
Yes. To get register a startup with the Startup India website and get startup benefits, it needs to have at least one registered office in India, since the location preferences, for the time being, are only created for Indian states. However, soon the government hopes to start registrations for stakeholders from the global ecosystem too.
What should I do when my password is showing as invalid at the time of registering my company on the startup India portal?
Please note that the password you enter for registering on the startup portal must contain 8 to 15 characters, out of which it must contain at least one lowercase letter, one uppercase letter, one numeric digit, and one special character. The portal will accept only a password that contains all these requirements.
How to write the startup activities section on the startup recognition form to ensure it is accepted?
A startup is registered with an objective to solve a problem. For a startup to be registered with the Startup India initiative, it must be working towards innovating something new or improving the existing technology to solve a problem. Thus, in the ‘Startup Activities’ section on the ‘Startup Recognition Form’, you must write the details on what problem is your the startup solving, what does your startup propose to solve the problem, i.e. the solution, the uniqueness of your solution, i.e. innovative nature of your product or service and what is the revenue-generating model of your startup.
Disclaimer: The materials provided herein are solely for information purposes. No attorney-client relationship is created when you access or use the site or the materials. The information presented on this site does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice from an attorney licensed in your state.