In India whenever an Entrepreneur wants to start his own business, he has to think about various legal issues such as the legal license which are required to start the business. The first and the most important legal thing that is required for any startup is Registering it Legally in India. And when people seek for such information they just get notified about the Private Limited Companies on the Web and get confused if they should spend more than 10k on them.
Most of the people remain unaware about a firm which is called Sole Proprietorship Firm in India. It is one of the best legal entity for startups to test their ideas. So let’s understand Why Solo Firm is the best legal entity for the Startups.
Sole Proprietorship firm is one of the oldest and most traditional legal entity in India. It is also one of the most popular legal entity for traditional businesses.
Features of the Sole Proprietorship Firm
- It requires only one person, so you are not bound to have partners unlike the private limited company.
- It’s 70% Cheaper as compared to private limited company i.e. it costs less than 5k
- You are the Boss and can keep all the profits.
- You can create maximum privacy.
- It’s easy to change your Legal Structure or Ownership according to the circumstances.
- It’s easy to shut your Business.
- Save the Income Taxes as Individual on Slab Basis.
Why you should Choose Sole Proprietorship Firm for your Startup –
- If someone wants to test their ideas on a smaller level then Solo firm is the best.
- If the startup doesn’t need any funding or building of product or services.
- You need legal entity just for Legal Formalities.
- You want to issue invoice on your brand’s name and need payment gateway.
- You are not ensuring huge revenues.
- You want to hire Interns and have to issue Internship Certifications on the name of your firm.
Procedure to Register a Sole Proprietorship Firm in India-
Step 1 -You have to Apply for any one of the given Licenses –
Shop Act License-
It’s called Shop and Establishment Act License in India. It’s issued by the state government to the Shop Owner or Business owner. Its gives the right to the business owner for doing his business on that place. On the basis of this Certification, you can easily open a bank account on the name of your firm.
Tip :- if you want to start a Small Product based Startup like E-commerce business through your own website or offline trading business on a small level or want to attach your Car with Ola then you can apply for this above license.
It’s called TIN Number which is a popular term for this license. It’s issued by the state government to the business owner on their firm’s name. It is very expensive in some states due to VAT Security or providing the Surety as Voluntary Registration.
Tip :- if you want to start a Small Product based startup where your turnover or sales may be more than 5 lac in next one year or want to sell on E Commerce Websites like Flipkart or Snapdeal or Amazon then you must apply for the VAT/CST.
Service Tax License –
It’s called Service Tax Registration Certification which provides a ST Code Number on the name of your firm. It is required when your turnover crosses 9 lac but as a Sole Proprietor. You can apply for this license in the starting for opening a current bank account on your firm’s name. It charges service tax after the turnover has crossed 10 lakhs.
Tip :- if you want to start a service based startup then you must apply for the above license.
Common Documentation which is required for the above License –
- A copy of Pan Card. It is mandatory for starting any business
- Voter id or adhar card or driving license or passport.
- One Business Place possession proof , if the place is on rent then you have to require Rent Agreement and NOC from the landlord, if the place is yours then a copy of electricity bills is required.
Step 2 : -Open a Current Bank Account on the Firm Name
Now you have to open a current bank account on the basis of any of the above mentioned Certification. Most of the banks open a business current bank account only on one Certification. But some banks require an Authorization Certification from Chartered Accountant regarding the verification of documents. So once your bank account is opened then you can apply for the payment gateway or could start issuing invoice to your customers.
Hope you enjoyed this article and got an idea about the Simplified business Registration in India
About the Author – Dev Patel is Legal Team Member at MyOnlineCA Which simplified Business Registration in India for Startups and Small Business throughout the Technology & Tools. For the any type of business legal queries just drop an email at [email protected]