A proprietorship form of business is a common business structure in India. A  proprietorship business is established and managed by a single person. This type of business form is best suitable for individuals wishing to start a business with less investment. Generally, it does not require any registration as such. 

A  proprietorship business can be started from home or on a premise with a minimum amount. The control of the business is solely in the hands of the single proprietor/owner who invests in the business. He bears all the losses of the business and enjoys all the profits. He can appoint persons for conducting the business, but the ownership will rest solely with him.

Many local businesses such as grocery stores, parlours, boutiques, retail stores, etc., can be established as a sole proprietorship firm. Even small traders and manufacturers can establish a proprietorship firm.

Any person who wants to start a business with less investment can opt for this type of business form. It can be started in a time span of 10-15 days. Also, the control in the business is solely in your hands.

Advantages of Proprietorship Firm :

Less compliances

The proprietorship business can be started easily by just one person. There is minimum compliance that is required to be adhered to get it incorporated. This form of business is economical as it is relatively less expensive to start than a company or LLP.

Control of the business

The proprietor will have complete control over the business. He will look after all the aspects of the business. Since only one person is running the business, secrecy can be maintained.

Quick decision making

The proprietor takes all decisions of the business. The decision making rests with a single person. Thus, the decisions can be taken quickly and immediately without the need for consulting anyone.

Disadvantages of Proprietorship Firm :

Unlimited liability

There is an unlimited liability on the sole proprietor. He is personally liable for all the transactions he enters in the business. If any loss occurs, he will have to bear the whole loss out of his personal estate.

No perpetual succession

There is no perpetual succession which means it can come to an end if something happens to the sole person taking care of the business. It can shut down at any time. This makes the business unreliable and difficult to gain public trust for entering into agreements or contracts to expand the business.

Difficult to raise funds

Since a single person manages the business, it is not easy to raise capital. The capital of the business is from the investments put in by the proprietor. The sole proprietorship firm has no separate legal entity status from the owner. As it can come to an end at any time and there is no separate entity, it is difficult to obtain funds from third parties.

Registration of Proprietorship Firm :

1. Applying for PAN card.
2. After obtaining a PAN card, or if the proprietor already has a PAN card, the next step is to keep a name for the sole proprietorship business.
3. The next step is to open a bank account in the name of the business. All the transactions of the business will be through this bank account.
4. Though no specific registration is required for starting a proprietorship firm, certain basic registrations are required to be obtained by a proprietorship firm for doing business.

The basic registrations required by a proprietorship are:-

• • The proprietor needs to obtain the Registration Certificate under the Shops and Establishment Actof the state in which the business is located.
  • The  proprietorship should also register for GST if the business turnover exceeds Rs.20 lakh.
  • The  proprietorship can also register as a Micro, Small and Medium Enterprise (MSME) under MSME Act, though it is not mandatory, it is beneficial to be registered under the same.

Documents Required for Proprietorship Firm :

The documents required for registration of Proprietorship are-

• Aadhaar card.
• PAN card.
• Registered office proof.
• Bank account.

Checklist required for Proprietorship firm :

• PAN card of the proprietor.
• Name and address of the business.
• Bank account in the name of the business.
• Registration under the Shop and Establishment Act of the respective state.
• Registration under GST, if the business turnover exceeds Rs.20 lakhs.

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