In our earlier articles, we have already seen What a Sole Proprietorship Firm is.
Now we know that A sole proprietorship firm is most commonly used by the individuals who are starting some venture because of the simplicity of this form of running business.
In India, there are no specific requirements of registering the proprietary firm like in case of other forms of businesses like Partnerships & companies etc. Here an individual and his sole proprietorship are considered as one and there is no distinction in between them legally.
However if you want to opt for loan from banks then you need to provide some documents as proof of business. For this sake you can opt for getting registration of your firm under some legal provisions so that same can also act as proof of business. Further if you want operate a shop then you may need to get a license to operate from the local authorities.
So we can say we can give a sole proprietorship a legal existence by doing any of the below mentioned registrations. One thing should always be maintained in our mind that A sole proprietorship even though it is registered under any act to do business, its legal existence is not separated from its owner. You can use different name to operate a business but its ownership and most importantly the risk associated with business always remains with its owner.
Ways to register the sole proprietorship
Registering for Udyog Aadhaar thorough MSME
One way of registering a sole proprietorship in India is to get the Udyog Aadhaar from MSME.
Here MSME stands for Ministry of Micro, Small and Medium Enterprises. It is an apex body for the formulation and administration of rules, regulations and laws relating to micro, small & medium enterprises in India.
An Udyog Aadhaar is a unique identification number provided by the Ministry of MSME to the owners of the business. This registration can be done by any businessman’s doing businesses in any forms like partnerships, companies and even sole proprietors as well.
Udyog Aadhaar provides proprietorship a unique identity along with the benefits of getting registered as MSME like availing benefits under various schemes announced by ministry.
We will see the benefits of registering under MSME in our next post. In this article we will continue to see various way of getting sole proprietorship registered.
Registration under Shop and Establishment License
We will now see registration requirement under Shop and Establishment Act.
So if you have –
A place where goods are sold by retails or as wholesale or
A place from where services are provided to customers
then you can apply with the local municipal corporation of your city for registration of your proprietorship business under Shop and Establishment Act.
Place of business as mentioned above, does not include a factory, a commercial establishment, residential hotel, restaurants, eating house, theatres or public amusement or entertainment parks.
Registration under GST
GST registration is another method of getting your proprietorship registered under GST laws. If you are doing any business of buying or selling goods or services you can apply for this registration.
However once registered under GST, it brings with it some obligations in the nature of some compliances like filing returns etc. Further as per law, it is not mandatory to get registered under GST, if a sole proprietor has a turnover of less than Rs 20 Lacs.
WHICH METHOD TO OPT FOR REGISTERING PROPRIETORSHIP?
Friends if you go through the above article carefully you will observe that all above are not the registering option, means these registrations are required for sake of doing the business and not for registering the proprietorship business.
So the question is which method is required to be selected.
What we think is, if you want to do business as Sole proprietor and you are having or targeting to achieve a turnover of not more than Rs 20 Lacs and business identity is only your concern and you are required to set up a shop to run the business or start some kind of service like consultancy, then you should opt for registration under Shop and Establishment Act with Local authorities.
If you grow your business further and if you want to take benefit of any scheme provided by ministry under MSME Act, then you should register for Udyog Aadhaar.
Finally if you achieve some growth and exceed the turnover above Rs 20 Lacs, then it is mandatory for you to register under GST act and to do the rest of the compliances under the same.
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