Proprietorship

Sole proprietorships are the most common business structure and are owned by one person. Sole proprietorships are attractive to small investors because of the benefits like Start up cost are low, Maximum Privacy of Business and Minimal regulatory compliance requirement for getting started. However, after the startup phase, proprietorship's do not offer the promoter a host of other benefits such as limited liability, separate legal entity, independent existence, transferability, etc., which are desirable features for any business. Therefore, proprietorship's are suited for unorganized, small businesses that will have a limited existence.


Requirement to be a Proprietor
Compliances to be Maintained
Tax benefits
Audit Not Required

About Proprietorship

  • Requirement to be A Proprietorship

    The Proprietor must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India

  • Compliances to be Maintained

    Proprietorship will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed.

  • Audit Not Required

    It is not necessary for Proprietorships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion


  • Documents Required to open a bank Account

    To open a bank account for a Proprietorship, Reserve Bank of India mandates that the proprietor provide two forms of registration for the Proprietorship along with the PAN Card, identity proof and address proof of the Proprietor. The two forms of registration can be any two of the following: service tax registration, MSME registration, VAT/TIN/CST registration, shop & establishment Act registration, Professional license, Chartered Accountant certificate or others as provided in the RBI Know Your Customer norms.

  • Tax benefits

    The owner of a sole proprietorship is not required to file a separate business tax return. Instead, they will list business information and figures within their individual tax return. This can save additional costs on accounting and tax filing. The business will be taxed at the rates applied to personal income, not corporate tax rates. However, once, income of the business exceeds Rs. 10 lakhs per annum, there are no major advantages for a Proprietorship in terms of taxation.

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Compliances Under GST

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Input Tax Credit Mechanism in GST

Understanding GST