Definition: A sole proprietorship is owned, managed and controlled by a single person. It is one of the most common forms of business in India and mostly used by small businesses operating in the unorganized sectors. Proprietorships have minimal regulatory compliance for commencement of a business. proprietorship’s lacks of other benefits such as limited liability, separate legal entity, transfer-ability, etc., which are desirable features for any business. Therefore, proprietorship’s are suited for unorganized, small businesses that will have a limited existence.
There is no legal rules & regulations for the registration or incorporation of a Proprietorship. Therefore, the existence of a proprietorship is established only by tax registrations and other business registrations that a Proprietorship is required to have as per the rules and regulations.There is no registry or regulation for the registering the name of a Proprietorship. Therefore, proprietorship firms can adopt any name that do not infringe on registered trademarks.
The advantages of a sole proprietorship include:
- Easy to Establish
- Easier to Operate
- Sole Beneficiary of Profits
- Compliance & Taxation
The disadvantages of a sole proprietorship include:
- Unlimited Liability
- Difficulty in Obtaining Funds
- Higher Tax Incidence
Check List For Sole Proprietor Concern:
- Do assumed (fictitious) business name registration
- Consider trade name registration
- Apply for required operating permits, licenses, bonds
- Set-up bookkeeping systems for income/expenses, auto use, home office, equip. purchase, etc.
- Set-up bank / checking accounts
- Set up tax filing calendar of due dates (yearly, quarterly)