The beginning of a business is always a great idea and for the Indians a sole proprietorship business is significant. This business structure is easy to establish and to run and therefore is suitable for use especially by small business. However, there is one more essential question that any perspective businessman must answer and that is the price of registration. In this blog, we are going to see the various expenses incurred to register a sole proprietorship business in India.
What do you understand by Sole Proprietorship?
Sole proprietorship is a business form where all the businesses are controlled and run by one person. It is not a legal personality; hence, the owner is exposed to all the potentially possible risks and is expected to take the responsibilities of that business exclusively. Sole trader business structure is common since it lacks so many formalities and legal formalities, and is easy to establish. However, it is important for anyone who wants to venture into this kind of business to have an insight into various costs that are incurred.
Sole Proprietorship Registration Process
In India, you do not have to necessarily register the business, but it is considered wise to do so if the business is a sole proprietor business. These are crucial when setting up the business and is applied when applying for licenses, opening an account in a bank and when applying for taxes. While the proprietorship registration process can vary by state and the nature of the business, here are the common steps involved:
1. Choosing a Business Name: The first strategy is to ask for a single name that is not in existence with other businesses. This name should not in any form be an infringement on any other name that is trademarked by any other party.
2. Obtaining a PAN: For purposes of taxation only, a Permanent Account Number (PAN) is mandatory. One needs to pay taxes and need a bank account.
3. Business Licenses: More so for some specific business activities, local authorities demand licenses or permits before one could engage in business. These could include trade licenses, GST registration and any health permits as well whatever that was necessary.
4. Opening a Bank Account: It is wise to maintain a business account for your business transactional activities. As for business accounts, your PAN and your business registration documents are normally needed from most banks.
Expenditure Structuring of the Registration Application of a Sole Proprietorship Firm in India
The legal formation of a sole trader is less expensive than most other types of businesses. Here’s a concise breakdown:
1. PAN Registration: ₹100 to ₹500 (compulsory for reasons of tax)
2. Business Name Registration: ₹1,000 to ₹2,000 (optional but safeguards your brand).
3. Licenses and Permits: A Trade License cost between ₹2,000 and ₹10,000; GST registration is free of cost, but a consultant may cost ₹1,000 to ₹2,000.
4. Legal and Consultant Fees: ₹2,000 to ₹5,000 depending on the business type.
5. Additional Costs: This comprises web and marketing costs.
Total Estimated Cost: up to ₹25,000/- for fair/average complex and ₹5,000/- for simple one and additional depending on the requirement.
Conclusion
As we have seen, registration of a sole proprietorship is cheap in India compared to other structures, but it’s important to consider all possible costs of doing so. When it comes to registration and compliance, so many business owners overlook these important administrative aspects all in the name of cutting costs, but in fact, what they are doing is setting themselves up for failure, therefore it important to carefully plan and execute registration and compliance so that it can act as a strong pillar of the business. To start with, a sole trader provides a favorable entry point into the business world, and if well prepared, you will be in a position to meet all registration points. Entering into your own business is never an easy thing and knowing the costs you are likely to encounter may help you to start this process with full preparedness.