The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
The biggest advantage is that it is easier to make both “Start and Exit” in the proprietorship form of doing business. The Proprietorship form makes sense when the entity wants to commence the business with the self-owned funds without resorting to external funding sources in the form of Equity.
Documents Required for a Sole Proprietorship Firm
- Permanent Account Number of the Proprietor
- Selection of Business Firm Name
- Address Proof for Place of Business
- MSME/GST/TAN registration for opening of the bank account.
- Easy to start as its formation does not require any regulatory approval.
- Compliance is almost negligible.
3. Exemption from maintaining complete books of account in case of Income declaration under Presumptive Income Basis up to Rs. 2 Crores.
- Exemption from Audit up to Rs. 50 Lacs in case of service organization and Rs. 100 Lacs in case of others or under Income declaration under presumptive basis as above.
- Overall Lower Cost of Operation
- Easy to wind up the operations if required.
7. Tax Benefit as Sole Proprietorship does not bear any separate entity status. The Income Tax Liability is arrived after providing for available Income Tax exemption limit in the hands of the Individual Proprietor.
- Difficulty in accessing the External Finance in the form of Debt and Equity
- Minimal Compliance
- Unlimited Liability of Proprietor, even extending to personal assets.
Best Fit for:
- Generally for new Start-Up Venture looking to start the operations with self-owned money.
- Small organizations which cannot afford the compliance cost and issues involved.
- Entrepreneurs which want a complete secrecy of their financial and proprietary information.
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