Proprietorship and its registration Proprietorship meaning and registration
This is the easiest and simplest type of business. Many such industries or businesses have been run in India, whose license is not with the person running the business. With the help of proprietorship, the business of the person is registered under his name, with the help of which the person can include his business profit, expenses etc. in his tax return. This actually proves to be very beneficial for those traders, who start their business with very little capital. All the benefits under this go in the favor of the proprietor. On the other hand, if the company suffers any kind of loss, then all that loss is borne by the proprietor. This is because there is no difference between the owner and the business under the proprietor ship. This means that the owner himself has to bear the burden of loan or loss in business under the proprietor ship. Also, the owner himself will be responsible for any encroachment on his business.
Proprietor Ship and Registration for it (Proprietorship meaning and its registration in hindi)
The government has fixed a minimum government fee of Rs 500 and a minimum trade fee of Rs 2500 for the proprietor ship. There is no set time limit for this. Usually, the time taken for the completion of registration is between 2 to 20 days from the date of application.
No specific formal method has been fixed for this. But any person can register the business under VAT / CST, Shops and Establishment Act, Service Tax, Central Excise etc. It is very important to keep the following documents ready for registering your business.
- PAN card and its copy
- Proof of residence in the name of the owner such as passport, voter ID or any kind of bill.
- passport size photographs
- Proof of your business address such as electricity or telephone bill
- Shop and Reputable Registration Certificate
- Bank account statement for at least six months
- Instant account details like VAT, CST etc.
A person can also start his work by creating a bank account in the name of his company. But to create such a bank account, the customer has to follow the KYC policy setting elements of the Reserve Bank of India. Below are the names of special documents for this, at least two of which are required to be deposited in the bank.
- Registration letter of the company under the Shops and Establishment Act on behalf of the Municipal Authority.
- Sales and Income Tax Returns
- CST/VAT Certificate
- Registration document on behalf of a professional tax body or sales tax
- Certificate of Practice from any CA Institute located in India.
- License or registration letter issued by the State or Central Government in the name of the company.
- Any kind of bill which is in the name of the company can also be used to open a bank account.
Proprietorship Ship Profit (Propriatorship advantages)
With this option, any man is ready to run his business considering the profit that comes from it. Its special benefits are given below.
- Proprietor ship is much easier and cheaper than setting up a formal corporation. In many states, exemption of double taxation has been given on this, which is always applicable to any formal corporation. For this, the name of the owner directly or a fictitious name suited to the business can also be kept.
- For this, the proprietor does not need to maintain or create a separate business tax report file. Instead, the proprietor can give all the details of his business in his personal tax return. In this way, by using the proprietor ship, one is saved from spending money on tax filing and its accounting. The most important thing is that it attracts income tax on the income of the owner and not the corporate tax rate.
- Under this, the owner is keeping many people under him for work. This opens up many avenues for job advancement, and for this the government does not even have to pay any additional tax. Along with this, the spouse of the owner can also be involved in the work without the company’s appointed employee. Although all the responsibility will be on one person, but a married couple can also start their business with the help of proprietor ship.
- Only one person takes all the decisions in this business. Therefore, there is no need to depend on anyone for any kind of decision. The owner can run his business in any way he wants.
Drawbacks of Proprietor Ship (Propriatorship disadvantages)
It is common to have some kind of risk in any business. There are also some such risks inherent in proprietor ships. Some of its drawbacks are being discussed below:
- Responsibility : In case of any kind of loss, the responsibility goes directly to the owner’s head, that is, if the company goes into loss, then only one person (owner) bears this loss. In the meantime, if the company goes into any kind of loan, then its payment will be made only from the owner’s account.
- Tax : Although it has the facility of tax, but in this the owner has to pay all the self-employment tax from his pocket. Also, there are some such taxes which are not covered under any kind of exemption, such as the tax on health insurance of all employees.
- lack of continuity If in any way the owner falls ill or the owner dies, the company is closed. In such a situation the business becomes ‘liquidated’ and is distributed among all the beneficiaries. In this case, inheritance tax and e-state tax are levied on the beneficiaries.
- Problems in raising capital: Although in the initial time the owner starts by investing his own capital, but later the owner gets into trouble when capital is needed and sometimes due to lack of capital, there is a situation of closure of the company. Also, money cannot be invested in stock or any other kind of business plan under the proprietor ship.