Many businesses are adopting the model of a Sole Proprietorship Firm for it has numerous benefits and perks when it comes to profitability and exceptions. Some of the notable benefits reaped by businesses that are running in this model are outlined below:
- Easy to start: For a Sole Proprietor who wish to run his business affairs is not required to undergo a detailed or hectic registration process. All they require are some business-specific licenses or registrations which can give them a kick start to run business legally.
- Very nominal investment: This kind of business model does not require hefty funds or money to get started. Sole Proprietorship model is thus highly favored and adapted by those who have some low-cost business ideas, such as retail shop outlets, grocery retailers, makeup artists, so on.
- Sole entitlement to profit: Since run at a low scale, such businesses usually have a single owner which no obligation to share profit among other stakeholders. They have complete control over their business functioning and rejoice their profit alone.
- Minimal compliances: This business model by nature is exempted from many imposing and strict laws which makes its existence and running quite simple and seamless. These businesses are free to work without a Certificate of Incorporation and does not require a Registration Certificate unless the profit exceeds a certain threshold. Further, such businesses stay in line with applicable GST compliances which makes it a mandate for them to register under the prevailing GST Act.
- Minimal taxes: In the eyes of law, Sole Proprietorship and Sole proprietor is a single entity. This means that the owner of such a business is free from imposition of separate tax liabilities. As per current IT Act, it is a mandate for such firms to file an income tax return so that the profit margin can be disclosed before the tax authority for the respective FY. The tax assessment such businesses are at par with what is imposed on an independent tax payer. This as a firm or business entity, there is no requirement to file separate tax return for the Sole Proprietorship firm.
- Quick Decision Making: Since there are not many hands and minds involved in managing such kind of businesses, sole proprietorship generally concludes decisions quicker and seamlessly. The owner has complete authority to take any decision pertaining to business affairs without any external intervention.
- Free from auditing compliances in case of low income: Sole proprietorship firm registration online and auditing is done only in case its income exceed the stated limit.
Some simple steps involved in establishing a Sole Proprietorship Business in India are detailed below:
Step 1: Obtain Aadhar Card: It is important for legalizing any business being conducted in India.
Step 2: Get a PAN Card: It is essential to links its functionality to the IT Authorities. The documents include applicant photograph, ID proof, & address proof.
Step 3: Bank account in the name of Business: Once you have secured Aadhar card and PAN card, get in touch with a designated bank and open a current account.
Step 4: Apply for Shop and Establishment Act License:
Step 5: Register under GST