“Explore the world of Sole Proprietorship, an unincorporated business with a single owner. Understand its simplicity, advantages like easy establishment, and disadvantages such as difficulty in obtaining funds. Discover various registrations like MSME, Shops and Establishments, FSSAI, and GST, tailored to meet business requirements.”
A Sole Proprietorship, also known as a sole trader or a proprietorship, is an unincorporated business with only one owner who is responsible for paying personal income tax on the company’s profits on its own slab rate of Individual Tax Slab. Since it’s not essential to register a distinct business or trade name, many sole owners operate under their own identities.
Due to a lack of Governmental Oversight, a Sole Proprietorship is the most straight forward type of business to start or dissolve. As a result, consultants, Sole Proprietors, and other freelancers frequently operate these kinds of enterprises. The majority of small firms begin as Sole Proprietorships, Grow, and then convert to a limited liability entity or Corporation.
Types of Registration that a Sole Proprietor can have as per their business requirements
MSME Registration
An individual cannot apply for MSME registration. A proprietorship, partnership firm, company, trust or society with an investment below Rs.50 crore and annual turnover below Rs.250 crore are eligible for MSME registration.
Shops and Establishments Registration
Any individual who plans on starting a Commercial Establishment that falls under the purview of the Act must file for registration within 30 days of commencing their business (days of registration may vary from state to state). This registration is mandatory for several reasons, including being necessary for opening a current account in a bank. The Shop Establishment License works as an essential license or proof of business that companies need to apply for other registrations and loans.
It is different for different states. Registration can be done according to the state in which the proprietorship is being started.
FSSAI Registration
One of the most significant registrations that must be obtained in order to start a restaurant, bakery, hotel, or food stall in India is an FSSAI registration. To operate their food company, individuals who are involved in the production, distribution, and storage of food goods or articles are also legally needed to be registered with the FSSAI.
GST Registration
Threshold Limit for GST Registration
- The threshold limit is Rs. 40 lacs or higher for the manufacturing sector.
- The service sector has a threshold of Rs. 20 lacs or higher.
- The threshold limit is Rs. 10 lacs or more for particular category states.
Special Category States include Arunachal Pradesh, Assam, Jammu & Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, and Uttarakhand.
- Jammu and Kashmir and Assam are two particular category states that chose to have a threshold limit of Rs.40 lacs for commodities.
- Puducherry, a regular category state, opted for a threshold limit of Rs. 20 lacs for goods.
Advantages of Sole Proprietorship
- Easy to Establish
- Easy to Operate
- Privacy of Business
Disadvantages of Sole Proprietorship
- Difficulty in Obtaining Funds
- Unlimited Liability
- Higher Tax Incidence
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