How to Start a Sole Proprietorship in India
A sole proprietorship is owned, managed and controlled by a single individual and is the most common type of business organization in India. Sole proprietorship are best suited for businesses that have small capital requirements and do not involve too much risk. No legal agreements are necessary to set up a sole proprietorship and it is not necessary to register the organization though the owner may need to obtain a license specific to the type of business he wants to run.
Due to these minimum legal requirements and low cost of creation, sole proprietorship are quite popular with small business entrepreneurs in India. As per the law, the owner and the business are treated as the same entity and all the assets, profits, losses, risks and liabilities are the property of the owner. For income tax purposes, no separate return needs to be filed for a proprietary concern since all business profits and losses are included in individual tax returns. A disadvantage of sole proprietorship is that the owner also assumes liabilities and the business ends with his death.
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Instructions
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Develop a business plan. Research your local target market before deciding what type of business you want to set up. It is best to choose a niche market where there would be a demand for the product or service you want to offer.
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Determine a location and capital requirements for your business. Decide whether you will be working from home or renting or buying your business premise. Ideally, your business should be located within close proximity to your target market. Estimate how much working capital you will need to start your business, ensuring that you have enough cash aside for day-to-day business expenses.
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Choose a name for your sole proprietorship business. Ensure that the name represents your business well and does not infringe on any trademark, copyright or patented name or word.
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Obtain the necessary licenses applicable to your business. The rules for obtaining licenses vary depending on the type of business you are running and local or state laws. Check with your local municipal office to see what licenses may be required. For example, you may need a Shops and Establishment license if you are opening a shop or commercial enterprise, if the laws in your state require it.
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Open a bank account for your business. While opening an account, you may be required to present a few documents for proof of identity and residence such as your Permanent Account Number (PAN) card, business licenses, a copy of your telephone or electricity bill as address proof and a rental agreement if you will be renting space for your business.
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Obtain the necessary tax registration. If you are offering a service and your business has an annual turnover of more than Rs.10 lakhs, then you need to register for service tax. If you deal in taxable goods, then you need to obtain a Value Added Tax (VAT) registration. Check on the taxation laws in your state to ascertain which tax registrations you need. For income tax, no separate return needs to be filed for a proprietary concern since all business profits and losses are included in individual tax returns.
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Promote your business. Set up a website that provides all the relevant information about your business and what you offer. Advertise in local publications, print business cards, brochures and fliers to publicize your business and attract customers.
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References
Resources
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