Registration of Sole proprietorship

Registration of Sole proprietorship

Sole proprietorship is one of the best business formations. It needs minimum of one person to be sole proprietor. Under this form of business, the sole proprietor has the full discretion to operate his business in any way he wants.

As per government of India rules, there are no special and separate rules for registration of sole proprietor like company act for registration of company. In a sole proprietor, one has to open a current a/c in the business name of the firm. During the opening of the current a/c you need to show the existence of legal entity.

We can divide the business in 2 categories, i.e. service based business and product based business:

• Service based business: This category includes business like e-commerce, classified website, online based consultancy, app based services and many more. Service based business needs to registration in case of sole proprietorship.

1. Service tax registration: In order to provide a proof of business separate legal entity, you have to obtain service tax registration certificate from banks. Albeit, service tax registration in sole proprietorship is required only when there is turnover over 9 Lakhs a year.
2. Chartered Accountant verification: A chartered accountant verification is also required in case of sole proprietorship. Chartered accountant verification certifies the nature of the work that firm is doing.

• Product based registration:

1. VAT registration: VAT registration is done according to the state rules. I every state there is a different threshold level over which one has to obtain VAT registration certificate. This certificate is helpful while opening a current a/c while dealing with VAT eligible products.
2. Chartered Accountant registration: Chartered accountant registration is required even in the product based registration. This certificate certifies the nature of the work to be done.

Procedure to be followed includes 4 steps:

• Prepare documents required for sole proprietorship registration.
• Apply for VAT registration
• Get Service tax registration of your company which is service based company.
• Apply for current a/c in any bank account

Documents needed for registration includes:

• PAN Card of sole Proprietor doing registration.
• Adhar Card, Driving License or passport for ID proof or address proof for the proprietor.
• Rent Agreement, No Objection Certification (NOC) or Electricity bills of the propertywhere the business will be taking place.
• Bank Statement copy
• In case of product based business some guarantors or security amount required for VAT registration. This is contingent from state to state.

Author: This blog is written by Mr. Vishal Aggarwal, student of Amity Law School, a passionate blogger & intern at  Aapka Consultant.

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