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A sole proprietorship, also known as a solo trader or a proprietorship, is an unincorporated firm owned, managed, and controlled by one individual. Small businesses working in the unorganised sectors use it as one of the most prevalent and easiest types of business to create in India.
In India, a sole proprietorship firm is recognised and offers a number of advantages, including minimal compliance costs, easier banking, less paperwork, and lower tax bands. However, it has a number of drawbacks, including the proprietor’s unlimited liability, difficulty in raising capital, and the fact that it does not exist indefinitely. Small merchants and traders regard it as a business structure for these reasons.
A sole proprietorship can be started by any resident Indian person who has a current account in the name of his or her firm. Depending on the type of business that will be started, registration may or may not be required. Banks, on the other hand, normally demand a Shops & Establishments Registration in order to open a current account.
There is no minimum capital need to create a Proprietorship. As a result, any amount of minimal capital can be used to form a Proprietorship.
To open a bank account for a Proprietorship, proprietor must provide two forms of registration for the Proprietorship firm along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: GST registration, MSME registration, Shop & Establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI KYCnorms.
Yes it is possible to convert a proprietorship firm into a Private Limited Company, Partnership Firm, LLP.
Unlike a Private Limited Company or an LLP, a Proprietorship Firm cannot be transferred to another person. You can sell your proprietary firm's assets to another person, but you can't sell intangible assets like registrations and government approvals.
Setting up and operating a Sole Proprietorship business takes no more than 15 days. It is popular among small sellers and merchants because of its simplicity. Of course, it's also a lot less expensive. This is the other reason why it’s the most widely used business structure.
From grocery stores to fast-food restaurants, as well as small traders and manufacturers, the majority of local businesses are conducted as single proprietorships. That isn't to suggest that larger businesses can't function as single proprietorships; they certainly can!
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