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One Person Company Registration

What is a Sole Proprietorship Firm?

In India, it's typical for businesses to start with a single individual, who becomes the sole proprietor of the Proprietorship Firm. This structure does not differentiate between the individual and the business entity. Despite this, many entrepreneurs opt for this structure during the initial stages of their business due to its advantages in terms of lower tax rates, flexibility, and other benefits. As more partners join a business, control over operations may decrease. Hence, many proprietors choose to operate their businesses independently and register as a sole proprietorship firm. Although there is no specific regulation for this type of organization, there are various ways to register a Sole Proprietorship firm. Small businesses seeking to minimize risks often prefer this structure.


Benefits of Proprietorship Firm Registration

You Are Your Own Boss

In a sole proprietorship, the proprietor enjoys full autonomy in decision-making and operations, without any need to report to or take orders from external parties. This structure is shielded from third-party intervention. Moreover, there are minimal compliance and disclosure obligations throughout the fiscal year compared to a corporate firm, leading to reduced government involvement.

Easy To Establish

Setting up and registering a sole proprietorship business is a straightforward process. No specific procedures need to be followed, and the registration cost is significantly lower than other business structures. The business operates under the proprietor's identity and can run any legal business under their name or a different legal name as a brand.

You Own Whole Share Of Profit

In a sole proprietorship, the proprietor possesses complete ownership of the business profits and assets, which are treated as the proprietor's personal assets. The proprietor has the liberty to choose to withdraw profits or keep them as reserves.

Tax Benefits

For income tax purposes, a proprietorship business is not considered a separate entity. The tax bracket assigned to an individual's income is applied to the business income. The tax rates are comparatively lower than other business structures such as companies and partnerships. Additionally, combining the individual and business income tax returns provides the benefit of deductions, making it an advantageous structure.


Documents required for registration of Proprietorship Firm


PAN Card

A self-attested copy of PAN Card of proprietor

Aadhar Card

Self- attested copy of Aadhar Card of proprietor

Bank Details

Details of the saving or current account of bank


Establish Proprietorship in 3 Easy Steps

1. Answer Quick Questions
  • Pick a Package that best fits your requirements
  • Fill in our questionnaire that take less than 10 minutes
  • Provide basic details & documents required for registration
  • Make payment through secured payment gateways
2. Experts are Here to Help
  • Assigned Relationship Manager .
  • Preparation and filing of Application
  • Registration under MSME Department
  • Firm Seal
  • Certificate of IncorporationAllotment of TAN
3. Your Business is incorporated
  • All it takes is 4 working days*
*Subject to Government processing time

Process to register Proprietorship online

Day 1
  • Business registration consulting
  • Collection of basic information
  • Provide Required Documents
Day 2 - 3
  • Preparation of online application
  • Online Sole Proprietorship registration
  • Application for allotment of TAN
Day 4
  • Dispatch of Firm seal and other materials if subscribed*
Private Limited Company One Person Company Limited Liability Partnership Partnership Firm Proprietorship Firm
Applicable Law Companies Act, 2013 Companies Act, 2013 Limited Liability Partnership Act, 2008 Indian Partnership Act, 1932 No specified Act
Registration Mandatory Mandatory Mandatory Optional No
PLC must be registered with MCA under the Companies Act Same as Private Limited Company LLP must be registered with MCA under the LLP Act Partnerships can be registerd or Unregistered, there are obvious benefits to register with the State ROF No registration required. Registration under MSME or GST act are considered valid for Proprietor Firms
Number of Owners 2 – 200 Only 1 2 – Unlimited 2 – 50 Only 1
Minimum of 2 to maximum of 200 shareholders excluding present or former employees who are members Only one shareholder Minimum 2 Designated Partners are required. No limit on the number of maximum partners Minimum 2 partners, and maximum 50 partners The proprietor can be the only owner of the firm
Separate Legal Entity Yes Yes Yes No No
PLC is a separate legal entity, and can enter into contracts or own assets in it’s own name Same as Private Limited Comapany Same as Private Limited Comapany Partnership firm does not have any separate identity from its partners Proprietor and business are the same, and hold same PAN number
Liability Protection Limited Limited Limited Unlimited Unlimited
Limited to the share capital subscribed (may vary if defined as limited by guarantee or unlimited liability in the MOA) Same as Private Limited Company Limited to the capital contribution agreed by the partner in the LLP Agreement Partners are jointly and severally liable to pay the debts of the Partnership Firm Paying off the liabilities of the firm is the proprietor’s responsibility
Statutory Audit Mandatory Mandatory Based On Applicability Not Mandatory Not Mandatory
Required to appoint a statutory auditor within 30 days of company incorporation Same as Private Limited Company Statutory audit required when turnover exceeds INR 40 Lac or contribution exceeds INR 25 Lac No statutory audit required. Tax audit applicable on basis of total turnover Same as Partnership Firm
Ownership Transferability Yes Yes (Restricted) Yes Yes (Restricted) No
Shares are easily transferable, so it makes it a most preferred option for raising capital through external investors There is only one owner in OPC. 100% shares need to be tranferred to change ownership Ownership can be changed with consent of other partners, by drafting a supplementary agreement Ownership is not easily transferable. Partnership deed outlines the restriction for transfer of ownership Ownership of the proprietorship is not transferable
Perpetual Existence Yes Yes Yes No No
Private Company prevails with change in ownership or management OPC has a perpetual succession, but can only have one owner at any time Change in Partners or Designated Partners does not affect the existence of an LLP Change in partner leads to dissolution or formation of another partnership firm Death or insolvency of proprietor dissolves the business
Foreign Ownership Allowed Not Allowed Allowed Allowed Not Allowed
Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route Member, nominee and director must be an Indian resident Foreign nationals can invest as per RBI and FEMA guidelines, usually under the Automatic Route Nnon Resident Indian (NRI) can be a partner in the Partnership Firm, subject to RBI regulations Foreign Nationals cannot own proprietorship business in India
Taxability Moderate Moderate High High Low
Lower rate of 25% for companies with gross turnover of INR 400 Crore. Additional dividend distribution tax may apply Same as Private Limited Company Tax rate of 30% on business profits, tax benefits to partners on profit distribution is high Same as LLP Tax rates for individuals apply to Proprietorship Firm, as per the Income Tax slab
Compliance Requirement High High Moderate Low Low
Private company has the highest compliance requirements, both annual and event based OPC compliance requirements are similar to PLC, except conducting an Annual General Meeting (AGM) Annual filing and few event based filings are necessary, but lesser compliance requirements as compared to company structure ITR of partnership needs to be filed annually, no major compliance requirements otherwise No requirement to file a separate ITR. Very less to no compliance hassle

Explore Sole Proprietorship Firm Registration – Its formation and registration

Frequently Asked Questions


Commencing a proprietorship business in India requires the proprietor to be an Indian citizen and a resident of India. Prior approval is unnecessary before starting the business. Nevertheless, Non-Resident Indians (NRI) and Persons of Indian Origin must acquire government authorization before initiating or investing in a sole proprietorship business.

Sole Proprietorship is an unstructured business format, and there is no specific law mandated for its registration. However, LegalWiz.in offers registration services for Sole Proprietorship under the Central Government's MSME (Micro, Small, and Medium Establishments) Development Act, 2006. The business entity must satisfy the registration criteria.

Starting a Sole Proprietorship Firm is possible with any amount of capital. It is necessary to introduce an amount that is adequate to commence the business. Since there is no limitation on the infusion or withdrawal of funds, the proprietor has the autonomy to modify the capital at any time. The decision to introduce capital into the business is solely the proprietor's prerogative.

The Reserve Bank of India requires two forms of registration for a Sole Proprietorship Firm to open a bank account in its name, along with the proprietor's PAN card, identity proof, and address proof. Acceptable forms of registration include MSME registration, GST registration, registration under the Shop & Establishment Act, professional licenses, Chartered Accountant certificates, or other forms specified in RBI's Know Your Customer norms or required by the respective banks.

There are no specific regulations or requirements for registering the name of a Sole Proprietorship Firm, allowing it to adopt any available name without infringing on registered trademarks. However, since there is no registry or regulation for registering the name of a Proprietorship, the only way to ensure the exclusive use of the business name is to obtain a Trademark Registration for the name. .

Once a sole proprietorship firm is registered, the proprietor and the business are indistinguishable from each other. Therefore, both the proprietor and the business have the same PAN card. Additionally, the assets and liabilities of the proprietorship firm are considered as those of the proprietor, and vice versa.

A business registered under the MSMED Act can take advantage of various subsidies, incentives, and schemes offered by the Central Government for that specific type of business, based on its registration certificate.

The registration under the MSMED Act is open to all business entities. However, the Central Government has recently excluded trading activities from being registered under this Act. Instead, businesses engaged in trading activities can apply for registration under the Shop & Establishments Act.

A defining characteristic of a Sole Proprietorship Firm is that it is owned and controlled by a single person, meaning there can be no other business partners. If your business requires the involvement of partners, you may need to consider forming a Partnership Firm, Private Limited Company, or Limited Liability Partnership instead.

A sole proprietorship business is exclusively owned, managed, and controlled by a single individual. Therefore, it is not authorized to issue shares or have investors.

Sole proprietors are required to file their annual tax returns with the Income Tax Department, and may also need to file other tax returns such as GST returns, depending on the nature of their business activities and registrations. However, unlike limited liability proprietors and companies, they are not obligated to file annual reports or accounts with the Ministry of Corporate Affairs.

It is possible for a company or LLP to take over a proprietorship. However, the process is complex, costly, and time-consuming. Hence, entrepreneurs should consult experts and consider starting an LLP or Company instead of a proprietorship to save time and money.

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