When single person runs a business then such kind of business is called as proprietary business, and the owner of the business is called as proprietor. Proprietorship is the most common form of the business which is used in India. You can start and operate the business with minimum regulatory compliance. So, its ideal for small businesses and first-time Entrepreneurs who would like to get a taste for business.
Only one person is required to start a Proprietorship and a Proprietorship can have only one promoter.
The proprietor must be an Indian citizen and resident. Non-resident Indians and persons of Indian origin can only invest in a proprietorship with prior approval from the Government of India.
There is no limit on the minimum capital for starting a proprietorship. Therefore, a proprietorship can be started with any amount of minimum capital.
Proprietorship will have to file their annual tax return with the Income Tax Department. Other tax filings like GST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.
It is not necessary for Proprietorships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion.
Yes, there are procedures for converting your proprietorship business into a company or an LLP at a later date. However, the procedures for the same are cumbersome, expensive and time-consuming. Therefore, it is wise for entrepreneurs to consider and start an LLP or a company in case they are expecting it to be operational at a bigger scale or they want to raise investment.
There is no registry or regulation for registering the name of a Proprietorship. Therefore, proprietorship firms can adopt any name that does not infringe on registered trademarks. Since there are no regulations for registering the name of a proprietorship, the only way to ensure exclusive use of the business name is to obtain a trademark registration of the business name.
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