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Proprietorship / Sole-proprietorship

Proprietorship is the easiest form of business and also known as sole proprietorship. Generally it is chosen for small businesses like retail shops, consultancy, and agency business etc. Proprietorship are prevalent among the small and unorganized businesses sectors.

What is Proprietorship?

Proprietorship is the form of business in which you are the only owner of your business. All profits or losses are yours. There is no legal difference between proprietor and proprietorship firm. For legal and compliance purposes your KYC documents are to be used.

 

Registration requirement for proprietorship

There is no separate registration required for starting proprietorship business in India. You could start proprietorship business by registering with Service tax department (if intend to sell services), VAT department (if you intend to sell goods) etc.

 

Compliance requirement for proprietorship

There is no specific compliance for proprietorship business. It is only need to comply with the provisions of the specific laws under which it is registered (like Service tax, VAT etc.).

Advantages of proprietorship :

  1. Easy to start: Proprietorship business is easy to start. No specific registration is required.
  2. Easy to comply: No specific compliance are prescribed for proprietorship business.
  3. Confidentiality: As you are the only person to establish and operate your business you don’t need to share your business secrets with others. Employees are given sufficient information to perform their duties only.
  4. Fast decision making: In proprietorship business decision making is tend to be fast in comparison of other businesses as you are the sole decision making authority.
  5. Tax advantage: There are various income tax advantages available for an individual. You can take benefits of that and reduce overall tax liability.

 

Disadvantages of proprietorship :

  1. Limited recognition: Proprietorship are considered small, non-serious and unorganized players of marker.
  2. Unlimited Liability: In proprietorship business liability is unlimited. Owner is directly responsible for any debts, losses, or violations etc.
  3. Limited fund raising capacity: Fund raising capacity is limited and mainly resort on proprietor’s personal assets or sources of finance.
  4. High turnover of good employees: It is very difficult to retain good employees in proprietorship firm because of a smaller setup and lesser recognition.
  5. Difficulties in scale ability: It is difficult to scale up proprietorship business.

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