Registering a proprietorship in India follows a unique approach, as there isn't a dedicated government-established registration process for this business structure. Instead, a proprietorship gains recognition through tax registrations mandated by relevant laws and regulations.One pivotal tax registration is the GST (Goods and Services Tax) Registration, which must be secured under the proprietor's name to formalize the business's proprietorship status. This registration signifies that the proprietor is conducting business within the framework of a proprietorship.

To run a proprietorship in India, you need important licenses and registrations, including:

• ✓ Get a Permanent Account Number (PAN) and an Aadhaar card for your business identification.
• ✓ Register under UDYAM, which recognizes your business as a Micro, Small, or Medium Enterprise (MSME) and offers government benefits.
• ✓ If your business exceeds specific thresholds, you must register for Goods and Services Tax (GST) to collect and pay GST.
• ✓ Open a separate bank account for your business to manage finances smoothly.
• ✓ Depending on your business location, register under your state's Shops and Establishment Act to follow local labor regulations.

• ✓ Easy registration: Sole proprietorship does not have any formal incorporation or dissolution process - as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.


• ✓ Lower compliance: As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.


• ✓ Simplicity: As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.


• ✓ Business decision: In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.


• ✓ Complete control: As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, defence, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

The following are some of the compliances that are applicable for a sole proprietorship:

• ✓ Income Tax Filing: The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.


• ✓ Business Income: Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.


• ✓ GST Return Filing: If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.


• ✓ TDS Returns: In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold - tax must be deducted at source and TDS returns must be filed every quarter.
  In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

• ✓ Pan Card (PAN card of the Proprietor.)
• ✓ Aadhar Card (Aadhaar card of the Proprietor.)