Sole Proprietorship

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WHAT IS SOLE PROPRIETORSHIP?

Sole Proprietorship in simple words is a one-man business organisation. Furthermore, a sole proprietor is a natural person(not a legal person/entity) who fully owns and manages this type of entity. In fact, the business and the man are the same, it does not have a separate legal entity.
In addition, a sole proprietorship usually does not have to be incorporated or registered. Thus, it is the simplest form of business structure and the ideal choice to run a small business or medium scale business. Let us look at some important features of a proprietorship.

BENEFITS OF SOLE PROPRIETORSHIP

Quick Decision Making

A sole proprietor exercises his right in making business choices.
It is easy for a sole trader to make decisions quickly, as he is the sole receiver of all the profits.
There is no need to share profits with anyone because he is the only investor who has invested money in the business.

Confidentiality of Information

A sole proprietor has the authority to make his decisions regarding business activities.
Since a sole owner is the only decision-maker of the business, he keeps all the business-related information confidential.
Hence, a sole trader is not bound by law to bring out its accounts in the eye of the public.

Direct Incentive

A profit is a reward for bearing risk by the proprietor in its business.
A sole proprietor is the only person who gains all the benefits arising from the business.
Hence, getting profits motivates the sole proprietor to give more efforts to get more benefits and higher growth in the business.

Sense of Accomplishment

A small success of the business gives the feeling of fulfillment of goals of the business and he gets motivated.
Hence, getting profits or long term benefits gives him a feeling of personal satisfaction.

Procedure

Applying for PAN. If you already have one this step is not required.
The next step is to name the business.
There is no formal registration required, but the next step is to open a bank account in the name of the business.
You can also register as a Small and Medium Enterprise (SME) under MSME Act, though not mandatory, it is beneficial to be registered under the same.
You can also register for GST if your turnover exceeds Rs 20 lakh.
One can also get a Shop and Establishment registration done.

Documents Required

Utility Bill of the business place
KYC documents of the Bank
License issued by the shops and Establishment Act
Income Tax Return of the Proprietor