Proprietorship Firm Registration

Proprietorship Firm Registration- An Overview

A Proprietorship Firm is the most straightforward and widely used form of business in India, especially for individuals starting a small or medium-scale business on their own. It is owned, managed, and controlled by a single person, making it ideal for solo entrepreneurs looking for full control with minimal regulatory requirements.

This type of business is not a separate legal entity, which means the owner and the business are treated as one and the same for legal and tax purposes.

Benefits of proprietorship firm

Easy to Establish
A proprietorship is simple to start. It doesn’t require a formal registration process under any specific act. The individual can operate under their own name or a unique trade name. The cost of setup is minimal, making it accessible for all aspiring business owners.

Tax Simplicity
The income earned by the business is taxed as the individual’s personal income, under the existing income tax slabs. No corporate tax is applicable. Income up to ₹2,50,000 per year is non-taxable, as per individual exemption limits.

Full Control – No External Interference
Since the business is run by a single person, the proprietor enjoys complete decision-making authority. There’s no board of directors, partners, or shareholders to consult. Every profit earned belongs solely to the proprietor.

Owner of Assets and Profits
All the revenue and assets of the business are considered personal assets of the proprietor. Likewise, any liabilities are also borne by the individual. This unified structure ensures direct ownership and responsibility.

Required document

Requirement 1: Documents to Submit to RBI

Certified copy of the Certificate of Incorporation (Issued by ROC)
Extract of the Main Object Clause in the MoA indicating financial business intent
Board Resolution stating:
– The company will follow RBI’s Fair Practices Code
– The company will not perform NBFC activities or accept public deposits before registration

Audited financials including:
– Balance Sheet and Profit & Loss Account
– Director’s Report and Auditor’s Report (for up to 3 years or since incorporation)

Educational and professional qualification certificates of all directors
Experience proof of directors in financial or banking services
Banker’s Report reflecting the company’s account conduct and status of deposit/loan balances as on the date of application

Requirement 2: Basic Eligibility Criteria

The company must be incorporated under the Companies Act, 2013 or Companies Act, 1956
The company must maintain a minimum Net Owned Fund (NOF) of ₹2 crore

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FAQ'S

Frequently Asked Questions

Find answers to some of the most common questions about our services. If you don’t see what you’re looking for, feel free to reach out to us.

1. What is a proprietorship firm?

A proprietorship firm is a type of business owned and operated by a single individual. It is the simplest form of business structure in India, without any separate legal identity.

2. Is registration mandatory for a proprietorship firm?

No, there is no mandatory central registration for a proprietorship firm. However, registrations like GST, MSME (Udyam), shop & establishment license, and a current bank account are often needed for business operations.

3. Can a proprietorship have employees?

Yes, a proprietor can hire employees. The firm can have staff and workers, but ownership and liability remain solely with the proprietor.

4. What are the tax implications for a proprietorship?

The income of a proprietorship is taxed as the individual income of the proprietor. Standard income tax slabs for individuals apply, and no separate corporate tax is levied.