Note on Sole Proprietorship

Drafted by CS Lalit Rajput


  • About Sole Proprietorship: 


A business that is owned and managed by a single person. There is no such thing as registration with any statutory Law like Company Law / LLP Law / Partnership Act etc.; 

Proprietorships are recognized by other registrations, such as a Service Tax registration or GST or MSME or  Shop and Establishment Act.


  • Features of Sole Proprietorship


  • Unlimited Liability: A sole proprietorship has no separate existence. Therefore, all debts can only be recovered from the sole proprietor. 
  • Small Business: The owner has unlimited liability with regard to all the debts. This should heavily discourage any risk-taking, which means that it’s suited to only small businesses. 
  • If you plan on running a business that requires a loan or may end up paying penalties, fines or compensation, it’s best you look into registering an OPC
  • Easy to Start: There is no separate registration procedure for proprietorships. All you need is a government registration relevant to your business. 
  • If you’re selling goods online, a proprietor would only need a tax registration (GST). Therefore, starting up as a sole proprietor is relatively easy.
  • Sole proprietors will be taxed on their personal income tax rate.


  • Disadvantages of Sole Proprietorship


  • Unlimited personal liability.
  • Difficulty in raising investment capital.
  • lack of financial control
  • difficult to find outside investors to fund sole proprietorships


  • List of documents/information required to register :
  1. Name of the Proprietor Firm
  2. PAN Card
  3. Aadhaar Card
  4. Rental Agreement on Business name if available
  5. Utility Bill – Electricity Bill copy of the address
  6. Email id and phone number


  • Steps:


Step 1. Open a Current Account in Bank with your Proprietorship Firm name. (For Bank KYC Two proofs required from step 2)

Step 2. Legal Certificate: get register under any 2 of the below:

  1. GST Registration certificate
  2. MSME Certificate
  3. Shop and Establishment Act 
  4. IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of bank account. Etc.


  • Income Tax Applicability on Sole Proprietorship


The income tax rate for sole proprietorship firm is the same as that of the income tax rate of individuals. In short, sole proprietor taxes are payable as of that of the individual.


  • Due date of filing of an income tax return for sole proprietorship firm:


Particulars  Due date 
Income tax return filing wherein the audit is not necssary 31st July 
Income tax return filing wherein the audit is necessary   30th September 



  • Kindly note that: 


Proprietorship firms are not eligible for a start – up / DIPP Recognition as Proprietorship firm are not covered under any Act or Law. A sole proprietorship has no separate existence. Therefore, all debts can only be recovered from the sole proprietor. Therefore, the owner has unlimited liability with regard to all the debts.


Lalit Rajput  is a qualified Company Secretary and graduate with 5+ years’ experience in handling Secretarial and Compliance management.

Working as Proprietor at Lalit Rajput & Associates, Company Secretaries and Compliance Head at EDUXGURU.

Key areas include handling Compliances related to Secretarial, Start-ups, SEBI, FEMA, Labour Laws, GST, NCLT, IPR, MCA/ROC, RTA etc.

He has started his career in Adventz Group with one of leading EPC Company, Kalindee Rail Nirman  – A Div. Of Texmaco Rail & Engineering Limited (erstwhile known as Kalindee Rail Nirman (Engrs.) Ltd.) and after that worked with Outcome Solutions & Services LLP, a Risk Advisory firm and S. Srinivasan & Co., Leading Company Secretaries firm in Mumbai and Chennai.

He is also an active blogger/Author at many platform and has written various articles on : Taxguru, Compliance Calendar LLP, Studycafe, Caclubindia, Casansaar, theTaxTalk, Lawyer’s Connect, IPleaders, Governance Professionals, Lawyers club India, Dealout Professionals and many more. 

He has also blogger at ENLIGHTEN GOVERNANCE and contributed articles in ICSI E-Corporate Manager published by ICSI Ahmadabad Chapter.



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