Proprietorship Firm Registration In Bangalore

Proprietorship Firm Registration in Bangalore

Proprietorship is the simplest form of business entity. It basically means a person carrying on business as an individual with a trading name. The legal entity in case of proprietorship is the Individual himself. Individual PAN will be PAN for Proprietorship

As the legal entity in the case of proprietorship is the individual himself, no separate registration process is applicable to bring the entity into existence unlike in the case of partnership firm, LLP or Pvt Ltd company.

What is required to bring a Proprietorship into existence is obtaining any one of the applicable registration like GST, PT or Shop & Establishment Registration to have a trading name. With the help of the, anyone of these registration individuals can open the Bank Account under such trade name, and carry on the business.

Depending on the nature of the business, the proprietor is required to obtain all other registration applicable to such business. There is no reservation of name under the proprietorship registration process. If the proprietor wishes to have the name reserved, he should apply for trademark registration.

Proprietorship is the most suitable form of business entity to carry on the business of all kinds of retail including online retail and other small scale business. Also, proprietorship can be chosen to start with a scalable business which upon the growth can be converted into other forms like LLP or Pvt Ltd Company.

Following are some of the advantages and Disadvantages of Proprietor ship:

Advantages of Proprietorship Firm Registration

a. Easy to establish

As mentioned above, there is no specific registration process prescribed for bring proprietorship into existence, the legal entity in case of proprietorship is the Individual himself, by obtaining any one of applicable registration like GST, PT, Shop & Establishment, MSME etc, a person can open the bank account under the trade name and commence the business.

b. Simple to operate

Proprietorship is the simplest form to operate, the sole decision-making authority is the individual himself. There is no approval of Board or Partners required as in the case of Partnership firm or Private Limited companies.

c. Simple Tax Structure and minimal Compliance requirement

Proprietorship attracts the simplest tax structure. For Income Tax, income is taxed in the hands of the proprietor and hence eligible for taxation at slab rates applicable to individuals.

Income tax Law provides for presumptive taxation for proprietorship under which income is estimated at presumptive rates of 6 %/ 8% of turnover up to 2 Cr thereby removing the requirement to maintain books of account and submission of financial statements for Income Tax.

There is no statutory filing/ reporting specifically applicable to proprietorship concern other than those applicable for the nature of business carried on by the proprietorship.

Disadvantages of Proprietorship Firm Registration

a.Unlimited Liability

Proprietorship comes with the feature of unlimited liability which means that personal assets of the proprietor can be appropriated to meet business liability if the business assets are insufficient due to losses suffered. Due to this feature, when the business grows beyond a point, it is advisable to convert the business into LLP or a Pvt Ltd company.

b.Difficulty in attracting Talent

Generally, the proprietorship is conceived to be small scale businesses, hence people can have hesitance in joining a proprietorship which can be a limitation in attracting the right talent. Also, Proprietorship doesn’t allow sharing of ownership with employees by way of ESOP etc.

c.Difficulty in raising Funds

Proprietorship can't raise funds by equity investment. Even the Banks also take a conservative approach in lending to the Proprietorships as the existence of Proprietorship is linked to the existence of Proprietor. Investment by way FDI is not allowed in a proprietorship other than by an NRI.

e.Difficulty in getting business

Some of the companies have restrictions not to enroll proprietorships as vendors, such restrictions may affect business growth for a proprietorship.

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