Want to start a business in India or setting up a new start-up? Sole Proprietorship registration for a single person company can be the best option for you. A sole proprietorship entity is an unincorporated business that only owned by one person. The owner of a sole proprietorship firm is called a sole proprietor of the business.

This is a pretty simple business formation for small entrepreneurs who want to start a new online or offline business. Starting a business in India? Go for a sole proprietorship company.

You can register a company in India as a sole proprietorship firm from a very first day of your business. Once your business starts growing, you can then turn it into a Private/Public Company or an LLP.

sole proprietorship firm

In a sole proprietorship company, you have total freedom to operate the business with your own name or under a trade/firm name or your website’s name. e.g. – Let’s say you are an IT services provider, you can operate your business with your own name – Lalit IT Services or under a trade/firm name – XYZ IT Services.

Key Features & Disadvantages of Sole Proprietorship Company in India

Go through below key features of sole proprietorship company.

  • Single owner of the business
  • Trade/Firm official company name
  • Single person company
  • Hassle-free starting a business in India
  • Easy to start & easy to close
  • Full control over the company
  • Lower cost of formation and compliance

Disadvantages of sole proprietorship firm. Have a look at below points:

  • Unlimited Liability
  • Lack of Resources
  • Lack of Credibility
  • Little hard to Raise Funds
  • Can’t add business Partners

Sole proprietorship firms are suitable for all individuals who wanna set up their business individually.

What is the purpose of a proprietorship firm registration in India?

As a sole proprietor, the main objective of the firm is opening a current bank account with the company or business name. Basically, most of the bank asks for any legal document or certificate for the business.

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Business are categorized into two different classes; i) Services Based Business(es) and ii) Sales/Manufacturing/Product Based Business(es).

Service Business Service based businesses provide their services either by internet (online) or office/onsite (offline) to the clients. Some services are Website Development, IT Consultants, Digital Marketing, E-commerce, Marketplace, Internet Classifieds, E-ticketing, Hotel Booking, Online Remote Support, Home Computer Repair Services, Broadband Service, Electronic Repairing and other similar.

So for the service based company, you will need 3 things to get registered your business as a sole proprietorship firm.

  • Service Tax Registration (ST-2 Certificate).
  • Chartered Accountant Certification regarding nature of the business.
  • Current Bank Account with the name of your business. It’s optional but required to run your startup.

Sales/Manufacturing/Product Business This type of businesses are selling products to the customers in retail outlets or other through the website (online) or offline (store). For selling products within your state, VAT will be applicable and if selling or purchasing goods from/to outside your state, then Central Sales Tax Act (CST) / TIN registration will be required.

These are some business fall in this category – ECommerce Website/Import/Export/Selling on E-Commerce Marketplace (Flipkart/eBay/Amazon), Retail Store.

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For a Product or Sales category based business, you’ll need 3 certifications to register the company in India as a proprietor.

  • VAT/Sales TAX (CST)/Tin Registration {VAT registration is very state to state}.
  • Chartered Accountant Certification on CA’s letterhead.
  • Current Bank Account under your business name.

Below is the list of general documents required in both the above cases of Sole Proprietorship firm registration.

Documents Needed to Register Sole Proprietorship Firm Or To Obtain Service Tax Registration in Delhi, India

Have a look at below common documents required for sole proprietorship firm registration or service tax number.

  • PAN Number is Mandatory.
  • PP Size Photograph and Identity Proof of the proprietor as named on PAN Card.
  • Document to Establish Possession of the Premises to be registered (lease or rent agreement / No objection certificate from the legal owner).
  • Cancelled Cheque of the Main Bank Account.
  • Authorization Letter by the Proprietor.
  • For VAT Registration – Need Some Security Amount as Fixed Deposit or Minimum Two Surety of Dealer that has already been registered in the State VAT Registration.

Note: Proprietor home place and business address can be same and in Delhi, security amount or surety is not applicable.

How To Get Service Tax Registration For Sole Proprietorship Firm

Well, you may want to know that how to register for service tax number. If you will ask any professional CA to get it registered, he/she may ask you for service tax registration charges which can cost you between Rs.3000 to Rs.8000.

So here we are representing some service tax registration procedure that can help to get the ST-2 certificate online from Central Board Of Excise And Customs.

  1. Register your sole proprietorship for service tax registration online directly from ACES official website – https://www.aces.gov.in
  2. Register an Account under New User and Go to tab REG => File ST-1 form.
  3. Submit the ST-1 form online, take a printout of ST-1 receipt and submit the acknowledgment slip with above-mentioned documents to your regional service tax office within 7 days (subject to verification). All documents should be self-attached.
  4. Within a couple of days, you will get the ST-2 certificate in your CBEC account and that’s it. This is your Service tax registration certificate. Now ST-2 doesn’t require to be stamped.

This was all 4 steps to obtain service tax number in India. Make sure you enter the trade name in the section “Name of the Applicant“.

How to Open Current Bank Account With Your Company Name

Now it’s time to open a current bank account with your business name. Documents required to open a current account. Have a look at below list of docs:

  • Service Tax Registration (ST-2) Certificate or Sales Tax or VAT registration or Shop Establishment License.
  • Letter from your CA regarding nature of the business.
  • Letterhead with the firm’s name and address.
  • Company Seal or stamp with a brand name.
  • Proof of identity and proof of address of the proprietor.

Collect all the above documents. Visit any Indian bank and ask them to open a current bank account. Also, you will be needed to deposit some amount to maintain a minimum balance for the current account.

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For the VAT registration in some state, it can be applied online but the problem is physical verification. So it’s my advice to take a help from a CA or freelancer.

Remember After service tax registration, it is required to file a service tax return. Get in touch with any professional chartered accountant for more help.

Well, I am not a CA or expert for service tax registration or VAT/CST/TIN certification. I wrote this article on how to register a company as a sole proprietorship firm in India to help entrepreneurs or start-ups to establish their business. If you have any query on this, please comment below.

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