Proprietorship, as the name defines, is the business of the person who is doing business in his own name with unlimited personal liability.
The ability to pay off your business debts from your personal income/assets. The major benefit of proprietorship is that it requires very few documentation and compliance. It's really simple, easy to operate and lightning fast.
What is the Registration Certificate I need for my new Proprietorship Firm. This is the most common question I receive from almost every aspiring entrepreneur who wants to start a new business. The first step is to open up a current bank account on your business name and then go for business registration.
To get a proprietorship firm, you need not require any specific registration from anyone. Yeah! You read it right. For Example, think of a name of your proprietorship firm and Voilà! It's done! Period. End of sentence. Any other registration is additional registration and you don't really need to be dependent on them to start your business operations.
Since, you are a person, you must be having a PAN (if not, get one) in your name. Guess what? Your personal PAN is also the PAN for your proprietorship firm. No additional PAN registration required.
You really need this only when you have to deduct TDS on any payment which actually attracts TDS under provisions of TDS under Income Tax Act, 1961 and rules made there-under (More on TDS in next post). Once you register, you have to mandatory file TDS Returns every quarter! Scary part is, if you don't deduct TDS on payments you make, you may attract huge penalty & fines.
4. Trade License:
It is always advisable to get a Trade License but it can't stop you from starting your operations. Trade License is in name of your proprietorship firm (it can also be in your name) and normally, renewed yearly in most cases.
5. Service Tax:
This is the devil of all registrations in proprietorship. Since, you don't have any registration, you think this is registration for proprietorship firm. Right? Wrong! It is registration for Service Tax which means even if service tax is not applicable, you need to file nil Service Tax return (Half yearly). Service Providers, beware. Service Tax Registration is not mandatory unless you touch Rs 9 lakhs as your annual turnover (Period from 1st April to 31st March next year). You don't have to pay Service tax if your Annual Turnover is less than Rs 10 lakhs.
6. Income Tax Return:
When you file your personal Income Tax return, all details of your business will be included there. Yes. There is no separate Income Tax Return to be filed.
7. Other Registrations:
Most of the registrations vary from industry to industry, sector to sector and sometimes, even on geographic location. Make sure you consider all these factors before starting your business operations. (For example, opening a restaurant, you need a food License and couple of other certifications)
Entrepreneurs are known for making smart decisions relating to limited resources they have and leverage this to build a million dollar worth enterprise.
Hence, these factors make sure you save every possible penny and start your business focusing on Core Areas and not on silly Registrations & Compliance's.