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Documents Required For Sole Proprietorship Registration in India
A sole proprietorship is an easy and simplified way to start a business in India. There is no legal difference between the owner and the business in the case of sole proprietorship. There are three ways to register for a sole proprietorship in India.- Registering under the Shop and Establishment Act
- Getting an Udyog Aadhaar (or) Udyam under the Ministry of MSME
- Registering through a GST registration
Each of these ways requires a different set of documents for registration.
About Documents Required For Sole Proprietorship Registration in India
Documents Required For The Three Ways of Sole Proprietorship Registration
1.Registering Under The Shop and Establishment Act - Documents
For registration under the Shop and Establishment act, you have to submit an application to the Inspector of your area. The application consists of the following:- Name of your shop or establishment
- Address of your shop establishment
- Your name and your manager’s name
- Others similar to the above may be mentioned.
For registering under the Shop and Establishment Act, you just submit the application and the inspector will verify how precise the application is and issue a registration certificate.
Registering Under The Shop and Establishment Act As An SME
You can register as a Small and Medium Enterprise (SME) through the MSME Act. The application can be submitted online. Although registration as an SME is not necessary, it is very beneficial, particularly when applying for a business loan. The government runs several schemes for SMEs, and they offer loans with low-interest rates in these schemes.2. Documents Required For Getting an Udyog Aadhaar or Udyam Under The Ministry of MSME
You have to apply under the Ministry of MSME for sole proprietorship under Udyog Aadhaar or Udyam. The documents required are as follows:Aadhaar Card: Every registration in India requires an Aadhaar card today. Also, most of them require your Aadhaar card to be linked with your PAN. So, if you don’t have an Aadhaar number, apply for it. You will get the hard copy of the Aadhaar at the registered address within 15 to 20 days.
- PAN Card: An individual without a PAN number cannot file for your income tax. As a sole proprietor of the firm, you have to file the tax. So, apply for the PAN. You can apply for it online and it will cost only 110 Rs. You can upload the Aadhaar card as the KYC. Once it is KYC verified, you can submit the application. The submitted application is verified by NSDL, and if the details are correct, the PAN number will get assigned within 7 to 8 days. Also, within 15 to 20 days, you will receive the hard copy of the PAN card.
- Bank Account: You can open a bank account if you have either your Aadhaar or your PAN number. You also have to carry your address proof and ID proof. For opening a current account, you have to submit a GST registration document to the bank also.
- NIC Code: The NIC code or the National Industrial Classification System assigns a unique code number to each business type. You can find the NIC code through the internet or via the NIC handbook. This code is used to know about the activities of a business.
3. Documents Required For Registering through GST
Those businesses with an annual turnover of Rs. 40 Lakhs can get themselves registered under GST. If you are selling online on ecommerce websites, then you must get a GST number. Whatever be your turnover, if you are supplying goods, then you must get a GST registration. The documents required are:- PAN Card: The PAN number of the proprietor is required
- Aadhaar Card: The Aadhaar number of the proprietor is required
- Address Proof of the Business Location: This can involve proofs such as electricity bills, rent agreements, etc.
- Proof of Business Registration: This includes proofs of registration with Trade Licenses/State Government Authority
- Identity and Address Proof of The Director:
- Bank Account: The director should have a functional current account in a bank for applying to GST registration.
- Digital Signature: The director should have his digital signature.
- A Certified Letter of Authorization: This letter certifies that any individual has the right to carry out transactions on behalf of the organization.
In What Name Should The Sole Proprietorship Firm’s Documents Be Obtained?
The proprietorship firm's PAN or Aadhaar will be in the name of the sole proprietor. The sole proprietor may use his personal PAN. As for the firm, it does not have a separate legal existence and this does not receive a distinct PAN.In Whose Name Should The Bank Account of The Sole Proprietorship Firm Be?
The bank account must be in the firm’s name. The account should be a current account. All the business transactions of the sole proprietor firm should be conducted using this account.Conclusion
The documents mentioned above are mandatory to apply for any sole proprietorship firm. If you have them, you can apply easily to any sole proprietorship firm.
FAQs of Documents Required For Sole Proprietorship Registration in India
1. What is the proof for sole proprietorship?
The proofs are as follows:
- Permanent account number in the proprietor's name
- Voters identity card issued by The Election Commission of India in the sole proprietor's name.
- Passport
2. How much does it cost to register as a sole proprietorship firm in India?
The total fees for the registration of sole proprietorship in India is Rs. 1,999. This includes government and professional fees. The main cost is mandatory registrations for the existence of proprietorship firms like GST registration, MSME registration, etc.
3. What are the disadvantages of sole proprietorship?
The disadvantages of sole trading include:
- Unlimited liability for debts since there is no distinction legally between private and business assets.
- The ability of the sole proprietor to raise capital is limited.
- All the responsibility to make day-to-day business decisions falls on you.
4. Do sole proprietors pay income tax?
The owner of the sole proprietorship will have to pay income tax on all income listed on the personal tax return. This includes income from business activities at the applicable individual tax rate for the year.