How to Start Business in India - "Sole Proprietorship Firms"

Following are the type of business formats you can choose to start a business in India starting from the simple ones to more complex ones.

1. Sole Proprietorship.
2. Partnership or Joint Venture
3. Private Limited Company
4. Public Limited Company

How to start a Sole Proprietorship Firm

Let's first discuss about how to start your own Proprietorship Firm in India.

Proprietorship firm is the simplest business format in India. It is best suited for first time entrepreneurs. It is easy to open and easy to close.

A proprietorship firm has advantages such as being relatively easy to get up and running - not too many company and tax related formalities to be completed. Far fewer records need to be maintained, and compliance levels are also lower.

You can start a proprietorship without going for lenghty registration formalities. You can just think of your business name (be ensured that the name is not an existing trademark) and start doing it. But for the purposes of banking you will need some kind of document to open a bank account in the name of your proprietorship firm. For this you can take following steps.

1. If you are in manufacturing or service industry, you can register your prop. firm with local "District Industries Centre"(DIC) by filling a simple form for Provisional Registration commonly called as "SSI Registration". You will get the provisional registration in a couple of days time and that provisional registration is widely accepted by banks to open a bank account.
2. After that you can go for VAT Registration and Service Tax Registration.
3. However if you are providing your own services (not of any franchisee) than service tax registration is not required till you reach Rs. 8 lacs of gross receipts.
4. If you are a trading concern, then you will not be able to get the SSI registration as discussed above. In this case you can go for "Shop & Establishment Registration" with local labour department. However, in case of trading VAT registration will also become mandatory if you are dealing in Taxable Items.
5. As far as the Income Tax formalities are concerned, a Proprietorship firm is not a separate entity in the eyes of Income Tax. The income from your prop. firm will get added in your total income for tax purposes. You can use your Permanent Account Number (PAN) in your proprietorship firm. You will not get a separate PAN for your prop. firm.

Advantages :

1. Simplest business form
2. Easy to start and easy to close.
3. Very less paper work to get started.
4. No name related constraints except existing trade names.
5. Ideal for small business start-ups and first timers.

Disadvantages :

1. Considered less credible in large business arena.
2. Considered as one man show and rightly so.
3. Unlimited personal liabilities in case of any disputes.
4. Personal assets get involved.