Pass-through tax advantages, ease of creation, and low fees for both creation and maintenance are the main advantages of a sole proprietorship. There’s no need to register your business with the state when operating as a sole proprietor.
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In layman’s terms, a sole proprietorship is a business organization that consists of just one person. In addition, a sole proprietor is a natural person (as opposed to a legal person or entity) who is the sole owner of the business and is also responsible for its management. In point of fact, the individual and the company are one and the same; there is no distinct legal entity associated with the business.
In most cases, a sole proprietorship is exempt from the requirements of incorporating and registering as a business. As a result, it is the least complicated form of business structure and the most suitable option for the management of a small or medium-sized enterprise. Let’s take a look at some of the more significant aspects of a proprietorship.
There is no specific legal framework in place to administer a sole proprietorship. As a result, there are not a great deal of additional regulations and rules to adhere to. In addition, it is not necessary to incorporate the business or register it with any authority. In point of fact, in the majority of instances, all that is required of us is the licence so that we can run the desired business. And in the same way that there was hardly any legal process involved in its formation, there is almost none involved in its closure. Overall, it makes it possible to conduct business with relative ease and few interruptions.
In India, we are exempt from having to register ourselves as sole proprietors. As a result, there is no central location from which one can verify the standing of a sole proprietorship. On the other hand, if a proprietor has submitted an application for GST registration, the GST registration and filing status of the proprietorship can be checked on the GST Portal to verify the existence of the proprietorship. This is done so in order to determine whether or not the proprietorship actually exists.
A sole proprietorship does not have any formal incorporation or dissolution process because it is the same as the Proprietor. This makes it easy to register a sole proprietorship. However, in order to run a business legally in India, the proprietor may be required to obtain various registrations and licences in order to comply with the country’s various laws and regulations.
In a sole proprietorship, only the proprietor has ownership of the business. He or she exercises full authority over the company’s assets, revenues, and expenses, as well as all business operations.
Because there are no partners, shareholders, or directors in this business, the sole proprietor is able to easily run it while only needing to comply with a small number of document and consent requirements. As a consequence of this, the structure of this kind of business is most appropriate for very small businesses.
The compliance burden will be lower because the vast majority of proprietorships are only required to register with a limited number of government departments, such as Income Tax and GST. On the other hand, legal entities such as limited liability partnerships (LLP) and companies are required to register with the Ministry of Corporate Affairs, submit numerous statutory returns, and undergo annual audits conducted by chartered accountants.
Decisions pertaining to the operation of the business are those that are made by the proprietor of a sole proprietorship. There is no necessity for the participation or agreement of any other individual. As a result, a proprietor is typically in a position to make snap decisions concerning the running of his business.
It is simpler to run operations when a single person is in charge of everything because that one person will be the only one making decisions, and he will not have to take into account the myriad of perspectives that are being voiced. In a proprietorship business, there is no such thing as a board meeting, and you do not need approval from any other individuals. There is no database that the government keeps that contains a list of proprietorships because sole proprietorships are a form of entity that is not required to be registered. Therefore, proprietorship firms have a higher level of confidentiality in comparison to limited liability partnerships (LLPs) and corporations, the details of which are available on the MCA website.
If you want to launch your new company but have limited funds and resources, the sole proprietorship business structure is the best option for you to go with. Additionally, it is the most feasible form of business if you want to carry out your business plan with the fewest possible legal compliances and the least amount of money spent on operations.
The Registrar of Establishments is the one who is in charge of carrying out the process of registering sole proprietorships.
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Depending on the type of registration, the process of a sole proprietorship firm becoming officially registered can take anywhere from two to twenty business days to be finished. This adds more time to the process in case the approval from the government is delayed in any way.
One of the most significant advantages of running a business as a sole proprietor is the tax breaks that are available to the proprietor. He is exempt from the corporate tax, which is 25 percent, but must pay tax at the individual tax rate, which is 10 percent. This means that he must pay tax.
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