A sole proprietorship is a type of unregistered business entity that is owned, managed and controlled by a single person. Sole proprietorship is one of the most common type of business in India and it is used by most micro and small businesses operating in the un-organized sectors.
Proprietorships are simple to start and have minimal regulatory compliance requirements for operating. This entity is ideal for entrepreneurs who are getting into business for the first time and for small businesses with having few clients.
The owner of a sole proprietorship business in India is called a proprietor. It cannot be a corporate or legal entity. The proprietor and the proprietorship are considered to be the same entity legally.
The PAN and other documents of the proprietor are the basis for obtaining all other business registrations and licenses. In case of any issues of liability in the business, the proprietor is held personally liable for it.
Starting @ Just
Easy To Set Up: The entrepreneur can start operations and receive payments from clients as no registrations are required to start a Proprietorship.
Ease Of Compliance: Proprietorship requires no additional compliance in most cases. PAN of the proprietor and proprietorship are the same. Hence in every year Income Tax Return in ITR Form has to be filed
Ease Of Dissolution: Proprietor doesn't have to particularly wind up the company incase he/she wants to cease operations.
Liability Protection: A Sole proprietorship does not provide the proprietor with limited liability protection. So the proprietor would be held personally liable incase of any loss or liability.
Transferibilty: Any license or registration can not be transfered to any other person or entity which has been obtained in the name of the proprietor.
Lifespan: The existance of Sole Proprietorship is tied to the proprietor, hence it would cease to exist with the proprietor.
Fund Raising: A proprietor cannot raise equity funds. Banks also tend to restrictions on the amount of credit they can lend.