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The oldest and the most common form of business.


If you are starting a one-person, self-employment kind of thing, then you're better of starting a proprietorship firm. This is usually for enterprises like digital artists, consultants, trainers, etc. proprietorship business don't require any registration with any authorities in India to come to existence. This is also the reason why proprietorship businesses don't have a separate PAN card for them and the PAN card of the Proprietor is used for any tax related purposes.

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A Sole Proprietorship Firm

When the business is owned and controlled exclusively by a single person. it is called sole-proprietorship, It is started through the initiative of the proprietor and is run with the capital provided by him or through borrowed funds. The proprietor manages the business himself, bears all the risk alone and gets all the profits. In this type of firm, the proprietor can apply for the pan card in his name or in the name of the firm. There is no restriction on the name of the pan card. He is free to choose any line of business and take any action with the some legal formalities, as applicable.

is the oldest and the most common form of business. It is a one-man organisation where a single individual owns, manages and controls the business.

Its main features are :-

  • Ease of formation is its most important feature because it is not required to go through elaborate legal formalities. No agreement is to be made and registration of the firm is also not essential. However, the owner may be required to obtain a license specific to the line of business from the local administration.
  • The capital required by the organisation is supplied wholly by the owner himself and he depends largely on his own savings and profits of his business.
  • Owner has a complete control over all the aspects of his business and it is he who takes all the decisions though he may engage the services of a few others to carry out the day-to-day activities.
  • Owner alone enjoys the benefits or profits of the business and he alone bears the losses.
  • The firm has no legal existence separate from its owner.
  • The liability of the proprietor is unlimited i.e. it extends beyond the capital invested in the firm.
  • Lack of continuity i.e. the existence of a sole proprietorship business is dependent on the life of the proprietor and illness, death etc. of the owner brings an end to the business. The continuity of business operation is therefore uncertain.

Its Advantages are :-

  • Ease of formation
  • Maximum incentive for work
  • Secrecy of business
  • Quick decisions and flexibility of operations

Its Disadvantages are :-

  • Limited capital
  • Limited managerial ability
  • Limited life
  • Unlimited liability

Hence, this form of organisation is suitable for the businesses which involve moderate risk, small financial resources, capital requirement is small and risk involvement is not heavy.
Even though registration is not essential, the owner has to obtain the necessary licenses specific to his/her line of business such as Shops & Establishments, Professional Tax, Service Tax, VAT, IEC, etc. A sole proprietorship can be registered under the MSME Act to avail the benefits and protection under that act.
Technically, no registration is required to start a business under sole proprietorship. However, to open a bank account in the name of the firm, a minimum of 2 registrations such as Shops & Establishments, Professional Tax, Service Tax, MSME, etc. under the local, state or central authority is mandatory to comply with the Know Your Customer (KYC) norms of the bank.