HOW TO START AND REGISTER SOLE PROPRIETORSHIP BUSINESS IN INDIA
Sole proprietorship is a one-man organization where a single individual owns, manages and controls the business. It is the easiest type of business and the proprietor owns 100% of the business and makes all the decisions on his own. Here are some steps to start and register for a sole proprietorship in an efficient and hassle-free manner –
1. Decide what kind of business you’ll start - The choice you make about what type of business you start will affect how much you pay in taxes, the level of risk or liability to your personal assets. A variety of businesses can be considered by a sole proprietor. As it involves just one individual who owns and operates the enterprise, there are a variety of options to choose from. Here are some examples – freelance writer, housekeeper, caterer, financial planner, event planner, consultant, etc.
2. Ensure a sole proprietorship is right for you – As a sole proprietor, there is no legal distinction between the owner and the business. Hence, it is important to determine if sole proprietorship is really your cup of tea. This can be analyzed by looking at its pros and cons.
- Ease in decision making and operation
- Ease of set up
- Low tax rates
- Full control over revenue
- Personal assets at risk
- Lack of guidance and help
- Might lead to bankruptcy and shutting of business
- Perceived lack of professionalism
- Difficulty raising capital
3. Talk to your nearest Small Business Development Center – Once you decide if you want to start a sole proprietorship business, you should talk to a Small Business Development Center to understand all the legal aspects.
4. Choose a name - It is important to be creative when choosing a name for your business. It should be to-the-point and should give a basic idea of the business so as to generate an image of the business in mind as soon as someone hears it. Researching whether or not it’s taken and trademarked is where things can become difficult. Try not to choose a name that has been trademarked and once you decide an appropriate name, get it trademarked.
5. Register your DBA - As a sole proprietor, if you want to operate under a different name, you would have to register a fictitious or “doing business as” name, also known as a DBA. A DBA is mandatory when opening a bank account or credit card for your business.
6. Purchase a domain – It is advisable to make a website for your business for more appeal. A domain name should be the name of your business for ease of operation.
7. Licenses and Permits - You may need state or local permits and/or licenses to legally operate your business. Some of these are Operational License, Occupational License, Federal License, Local License, State Licenses, Sales Tax and Permits.
8. Get an employee identification number (EIN) – This is not required if a sole proprietor operates alone. If they hire an employee, they have to file for a federal EIN. It is free of cost and can be filed online.
9. Open a business bank account - Finally, to provide authenticity and ease of cash maintenance to the sole proprietorship and collect payment in the name of the sole proprietorship business, a bank account must be established. It’s also wise to build good credit history before actually starting your business.
10. Load up on insurance – One of the biggest risks involved in sole proprietorship is the investment of one’s own assets and business bankruptcy could mean personal bankruptcy too. Hence, insurance can save a big deal of financial and legal trouble in the future, especially health insurance, auto insurance and disability coverage.
11. Pay your taxes - The income tax rate for sole proprietorship firm is the same as that of the income tax rate of individuals. It is easier to keep a track of all the taxes paid or to be paid because as a sole proprietor, you’ll pay income tax on all income your business nets.
If you want to apply for Sole Proprietorship
then get in touch with us today.