Sole_Proprietorship


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SOLE PROPRIETORSHIP

The sole proprietorship is the simplest business form under which one can operate a business without any registration. It is an unregistered business entity which is owned and managed by one person. The sole proprietorship is a popular business form due to its simplicity, ease of setup, and nominal cost. It simply refers to a person who owns the business and is personally responsible for its debts/losses. A sole proprietorship can operate under the name of its owner or it can do business under a trading name.

The advantages of a sole proprietorship include:

Owners can establish a sole proprietorship instantly, easily and inexpensively.
Sole proprietorships carry little, if any, ongoing formalities.
Owners may freely mix business or personal assets.
Sole Proprietorship business is the simplest form of business.
Sole Proprietor has sole authority in decision making.
Sole Proprietor receives all the profits and gains.

Common Registrations for Proprietorship

TAN Registration: TAN registration is required to be taken from the Income Tax Department for deduction of tax at source (TDS) and filing of returns of TDS.
GST Registration: GST registration is mandatory if aggregate turnover in a financial year exceeds Rs. 20 lakhs or 40 lakhs in case of a supplier who is engaged exclusively in the supply of goods or 20 lakhs for special category states.
Udyam Registration: Udyam or MSME or Udyog Aadhaar registration can be obtained in the name of the business using Aadhar number of Sole Proprietor to establish that the Sole Proprietorship is registered under the Ministry of Micro, Small and Medium Enterprises.
FSSAI Registration: In case Sole Proprietor is going to operate any business in which FSSAI registration is required then Sole Proprietor must obtain FSSAI registration from Food Safety and Standard Authority of India.
Shop and Establishment Registration: Sole Proprietor is compulsorily required to register his business under the Shop and Establishment Act of respective State. The Shops & Establishment registration is a state-based, labour license legislation enacted under the respective state in which the shop or establishment has been set-up.
Import Export Code: In case Sole Proprietor thinking to export/import his product then Sole Proprietor must obtain the Import-Export Code (IEC) registration from Director General of Foreign Trade (DGFT).
Trademark: For the protection of Logo / Brand name / Trademark, Sole Proprietor can register his Logo / Brand name / Trademark under Trademarks Act, 1999 by filing a Trademark application to Trademark Authority. After registration of Logo / Brand name / Trademark, we protect our Intellectual Property Rights so that no other person can use/copy it.

Compliance required by a Proprietorship firm

GST Return: Every registered person shall furnish the details of outward supplies and inward supplies of goods or services or both during a tax period on or before the due date as specified by the government on the common portal.

Accounting: Every proprietorship firm shall prepare and maintain proper books of accounts and other relevant books and papers. Accounting is necessary for the GST Return, Income Tax Return, Tax Audit, GST annual return, GST audit, receivable or payable from customer or supplier respectively, etc.

Income Tax Return: Income Tax Return is the form in which assessee files information about his Income, expenses, deduction or other information and tax thereon to the >Income Tax Department. Proprietorship firm file income tax return of every financial year on or before the due date in forms ITR 1, ITR 2, ITR 3 and ITR 4, as the case may be.

Income Tax Audit:

A person carrying on business, if his total sales, turnover or gross receipts in business for the year exceeds Rs. 1 crore. This provision is? not applicable to the person, who opts for presumptive taxation scheme under section 44AD and his total sales or turnover doesn't exceed Rs. 2 crores.

Note: w.e.f. Assessment Year 2020-21, the threshold limit, for a person carrying on business, is increased from Rs. 1 Crore to Rs. 5 Crore in the case when cash receipt and payment made during the year does not exceed 5% of total receipt or payment, in other words, more than 95% of the business transactions should be done through banking channels.

A person carrying on profession, if his gross receipts in profession for the year exceed Rs. 50 lakhs.

The tax audit reports conducted by a registered chartered accountant are to be presented in a prescribed format. Under section 44AB of the IT Act, the form that is prescribed for the audit report is Form No. 3CB and to be reported in Form No. 3CD of the prescribed particulars.