M/s. V. B. Sheth & Co.

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Proprietorship

Proprietorship is the simplest and easiest form of doing business. All that is required to start a proprietorship firm is person interested to start any business. No documentation is required to start a proprietorship firm. However, a bank account shall be needed for accounting and tax purposes. Proprietorship firms do not have a separate PAN or TAN. The PAN or TAN of the proprietor himself is utilized for fulfilling the tax obligations of the proprietorship firm. Even the Income Tax returns and Quarterly TDS Statements are filed using the PAN and TAN of the proprietor. In other words, the proprietorship firm and the proprietor are the same for all intents and purposes.

Frequently Asked Questions

1. How many persons are required to start a proprietorship?

A. Only one and not more then one person is required to start a proprietorship firm.

2. Who can be proprietor?

A. Any person who is a resident of India can be a proprietor.

3. Shall I need to invest before starting a proprietorship?

A. No. You shall need to invest funds in your proprietorship as and when you starting doing business and provided on the needs of your business. Some businesses require a high level of capital since the start whereas in some businesses the capital requirement is moderate to small.

4. Can a proprietorship avail loan facilities form banks?

A. Absolutely. A proprietorship firm has equal opportunities to get loan facilities from various banks.

5. Can I borrow capital from my friends and relatives for my business if I run a proprietorship firm?

A. Yes. You may borrow funds from your friends and relatives as and when you require funds in your proprietorship.

6. Can I convert my proprietorship into a partnership in the future?

A. Yes. A proprietorship can be converted into a partnership whenever the need to do so arises.

7. What are my legal obligations if I run a proprietorship?

A. As a sole proprietor, your legal liabilities, in usual cases are annual filing of Income Tax returns, Audit of accounts (if required), filing Quarterly TDS statements (if required). Further VAT/CST formalities and/or Service tax and Central Excise formalities may also be needed to be fulfilled depending on the business.

Advantages Of a Proprietorship

Fast and easy to initiate

The time, efforts and money to start a proprietorship is nothing compared to the initiation of a partnership, LLP, One person Company or Private Limited Company. You can start your sole proprietorship firm within a few days with the least amount of paperwork and trouble.

A boon for startups

Considering the fact that the initiation of a sole proprietorship firm requires less time, paperwork and money, it is a great option for new entrepreneurs who wish to try and run a business before opting to convert their business into a partnership/LLP/One person Company/Private Limited Company. Based on how the business runs the sole proprietorship can be converted into any of these formats of business if and when required. In this fashion a new entrepreneur is absolved of the huge amount of capital required to start a business.

Taxation point of view

A sole proprietor shall show the profits from his sole proprietorship in his own Income Tax return. Which means that benefit of the basic exemption limit of taxation, which is Rs. 250000/- for F.Y. 2014 – 15, shall also be available to the proprietor. Unless and until your proprietorship does not have a profit exceeding Rs. 250000/- you are not required to pay tax.

No other legal formalities

A proprietorship does not need to fulfill other legal formalities like LLP/One person company/Private Limited Company like submitting of annual reports before the MCA or holding Board and Executive meetings or maintaining minutes of such meetings etc. A sole proprietorship has only a sole purpose. Ease of business.

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