Sole proprietorship allows you to run and own your business as an extension of your personal finances rather than as a separate entity. If you want to establish a small firm in India without the complications of corporation formation and registration, a sole proprietorship will allow you to do so. Sole proprietorships are the most common type of business in India because of the easy procedure for establishing them.
Sole proprietorship firms in India do not submit company registration to the national government. National company registration is only required of corporations. You may wish to form a sole proprietorship rather than a corporation simply to avoid the complicated bureaucracy of national registration.
Depending on the state and city that your firm operates in, you may be required to register with local government. Most local governments do not require registration, but some do, so check your local government's commerce website or visit the local commerce building to find the procedure you should follow.
Although your sole proprietorship firm does not need to register as a company with the Indian government, you may wish to submit an employer registration. Employer registration is an optional service that allows you to use the government's infrastructure to search for employees. If you are having trouble finding employees, this is a valuable resource.
India taxes the profit from your sole proprietorship as personal income, and you do not need to complete any additional forms to pay these taxes. Depending on the nature of your business, though, you may need to pay additional types of taxes, which you will have to complete registration for. Sales tax is the most common example of this. To register your business as a goods provider you must visit your local government commerce building and complete a short form.
The national government tries to remain hands-off for sole proprietorships to encourage the creation of new businesses, but you must always thoroughly check the local business laws before establishing a sole proprietorship in India. The procedures for registration of the firm can vary greatly between different cities. In addition, many local laws limit the types of business that can be done by sole proprietorships, and which apply additional taxes to sole proprietorships.
The impact of local laws can change drastically depending on the type of sole proprietorship that you are running. A goods dealer in a storefront should expect different regulations and taxes than a consultant operating from his home. Be sure to check the rules relevant to your business.