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A proprietorship, also known as a sole proprietorship, is one of the simplest forms of business structures. In a proprietorship, a single individual owns and operates the business. This individual is often referred to as the "proprietor" or "sole proprietor." Here are some key characteristics of a proprietorship:


The business is owned by one individual, and that individual is personally responsible for all aspects of the business.


The proprietor makes all the decisions for the business, from day-to-day operations to long-term planning.


The proprietor receives all the profits from the business but is also personally liable for any losses or debts incurred by the business.


A proprietorship is not a separate legal entity from the owner. The business and the owner are considered one and the same in the eyes of the law.


The proprietor has unlimited personal liability for the business debts and obligations. This means personal assets can be used to settle business debts.


Profits and losses of the business are reported on the proprietor's personal income tax return. The business itself does not pay separate income taxes.


Proprietorships are easy to set up and have minimal regulatory requirements. This structure is suitable for small businesses with a single owner who wants simplicity and control.


While some jurisdictions may require registration of the business name or a business license, the formal registration process for a proprietorship is generally less complex compared to other business structures.


The continuity of a proprietorship may be affected if the owner decides to sell or transfer the business, or in the event of the owner's death. It may not have the same continuity as a corporation.


Proprietorships are often small-scale businesses, such as sole practitioners, freelancers, or small retail operations. It's important to note that while proprietorships offer simplicity and direct control to the owner, the unlimited personal liability can be a significant drawback. If the business faces financial difficulties, the owner's personal assets may be at risk. As a result, individuals considering a proprietorship may want to carefully assess the level of risk associated with their business activities and explore other business structures if additional liability protection is desired.


In India, registering a proprietorship is a relatively straightforward process. However, it's important to follow the specific procedures laid out by the Ministry of Micro, Small and Medium Enterprises (MSME) and any other relevant authorities. Here is a general guide on how to register a proprietorship in India:


Select a unique and suitable name for your proprietorship. Ensure that the chosen name is not already in use and complies with any naming regulations.


Apply for a PAN for the proprietor. The PAN is necessary for income tax purposes and is often required during the registration process.


Open a bank account in the name of the proprietorship using the PAN and address proof.


While not mandatory, you may consider registering your proprietorship under the MSME category to avail benefits such as subsidies, schemes, and easier access to credit. This can be done online through the Udyam Registration portal.


If your business turnover exceeds the threshold limit for GST registration, you must obtain a GSTIN (Goods and Services Tax Identification Number). This is required for businesses engaged in the supply of goods or services.


Depending on the nature of your business and the state in which you operate, you may need to register under the Shop and Establishment Act. This registration is typically done with the local municipal authorities.


Easy registration

Sole proprietorship does not have any formal incorporation or dissolution process - as its the same as the Proprietor. However, to operate a business, the proprietor may have to obtain certain registrations and licenses to be compliant with the laws and regulations of India.

Lower compliance

As most proprietorship are only registered with government departments like Income Tax & GST, the compliance burden will be lower. On the other hand, entities like LLP or Company are registered with the Ministry of Corporate Affairs and have to file various statutory returns and be audited by a Chartered Accountant each year.


As there are no partners, shareholders, or directors, the proprietor can easily operate this business with minimal documents and consent requirements. Hence, this type of business structure is best suited for very small businesses.

Business decision

In a proprietorship, the business owner takes all business decisions. There is no consent or approval required from any other person. Hence, a proprietor can normally take quick decisions regarding his business affairs.

Complete control

As sole proprietorship is owned only by the proprietor. He/she has complete control over the assets, revenue, expenses and all business operations.


Since a sole proprietorship does not file any formation documents or annual reports with the federal or state governments, public disclosure of business operations are not required.



This type of business structure relies solely on one persons savings, borrowings and credit history. As there are no other persons are involved in this type of business structure, raising funds from banks will be very hard. Raising equity funds will not be possible - as this type of business entity does not allow for profit sharing or shareholding.

Personal liability

If a proprietor is unable to pay business loans or taxes, in a proprietorship - the personal assets of the business owner can be attached or encumbered. Hence, in this type of business structure - the proprietor will be held personally liable until all the liabilities are extinguished.

Business continuity

In case of death or disability of the business owner, the sole proprietorship will be automatically dissolved. Hence, there is will be no business continuity.


A proprietorship has various restrictions in terms of fundraising, liability and business continuity. Hence, only very small businesses that are in the unorganized sector operate as proprietorship.

Unincorporated business

Sole proprietorship are unincorporated businesses. Hence, there is no centralized database available to see if a sole proprietorship is active or inactive. Thus, sole proprietorship entities are mostly classified as unorganized business.

Document Required For Registration

Identity And Address Proof

Aadhar Card, Aadhar number is now a necessity for applying for any registration in India.

Income tax return can only be filed if the person has linked his PAN card with Aadhar number.

Address proof will be required for all directors and shareholders of the company to be incorporated.

For Indian nationals, PAN is mandatory. For foreign nationals, apostilled or notarised copy of passport must be mandatorily submitted.

Residence proof documents like bank statement or electricity bill should not be more than 2 months old.

All documents submitted must be valid.

Registered Office Proof

Register office of all companies must be in India .If it is a Rented Property, Rent agreement and NOC from a landlord. If it is a Self-owned Property, Electricity bill or any other address proof.

Documents submitted must be valid and not more than 2 month old.

Registering a Proprietorship Online

You can easily register a proprietorship online through my legal route.

To register a proprietorship, only the PAN & Aadhaar card of the business owner is required. We can help you obtain the following registrations in less than 15 days:

  • GST Registration
  • UDYAM Registration
  • Zero-Balance Business Current Account

PAN Card for Proprietorship Firm

A proprietorship is not a separate business entity. Hence, there is no procedure to obtain proprietorship PAN card. The PAN card of the business owner is used for the proprietorship.

Obtaining GST Registration for Proprietorship

GST registration for a proprietorship will be obtained by my legal route as a part of the service. The following documents are required for GST registration:

  • Permanent Account Number (PAN) of Proprietor
  • Digital Signature Certificate of the Authorized Signatory
  • Consent by Proprietor for obtaining GST Registration
  • Photograph of Proprietor and Authorized Signatory
  • Bank Account Details: A scanned copy of a cancelled cheque with the business entity's name, bank account number, MICR, IFSC, and branch information.
  • For commercial purposes, the rent / lease agreement should be in the name of the proprietor.
  • Additional documents such as Aadhaar Card, Driving Licence, Passport, or Voter ID in the name of the Owner with the complete address of the premises should also be provided if the address on the ownership document (Property Tax Receipt or Municipal Khata copy or copy of Electricity Bill) is incomplete.y

Obtaining UDYAM Registration for Proprietorship

Udyam Registration can be obtained online to avail various benefits available for small and medium sized businesses. Once the GST registration is obtained, the my legal route team would help obtain UDYAM registration by submitting Aadhaar card, PAN card and GST certificate to Government.

Bank Account for Proprietorship

The bank current account for a proprietorship will be opened in the name of the business owner using his/her PAN. The business owner will have to submit proof for doing business. Any two of the following documents can be submitted to create a current account instead of savings account in the name of proprietorship:

  • GST registration certificate
  • Shop & Establishment Act license
  • Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening a bank account etc.

Obtaining Shops & Establishment Act License for Proprietorship

From state to state, the process for acquiring a Shop and Establishment registration certificate changes. It is available both online and offline. In most states, Shop and Establishment Act registration can be obtained within 2-4 weeks.

Timelines for Sole Proprietorship Registration

A sole proprietorship can normally be registered in India through my legal route in less than 14 days. However, the timelines for registration will vary from case to case depending on the government and bank processing timelines.

Proprietorship Business Activities

A proprietorship can undertake any type of business activity that an Indian person can undertake across most sectors and industries. However, there are some activities like banking, insurance, financial services, lending, telecommunication that require specialized approval. In such cases, a company is mandatorily required to obtain various approvals from the Government. Hence, proprietorship business structure only works for business activities that are small scale in nature.

Compliances for Proprietorship

The following are some of the compliances that are applicable for a sole proprietorship:

Income Tax Filing:

The business owner of a proprietorship will have to file personal income tax return using form ITR-3 or ITR-4.

Business Income:

Only income tax forms ITR-3 and ITR-4 allow for declaring business income. Hence, all proprietorships will have to file form ITR-3 or ITR-4 to be compliant with the income tax regulations.

GST Return Filing:

If a proprietorship has GST registration, GST return must be filed every month and quarter as per the scheme under which the business is registered.

TDS Returns:

In case the proprietorship is having employees or purchasing goods/services beyond a certain threshold - tax must be deducted at source and TDS returns must be filed every quarter. In addition to the above, various other compliance requirements maybe applicable to the proprietorship based on industry and location.

Frequently Asked Questions

A sole proprietorship qualifies as a company, but it only has one owner and isn’t required to register with state enemies. Beginning a sole proprietorship is extremely simple and doesn’t require a formal filing or paperwork process. All you have to do is simply go into business. Though as a sole proprietor you are exempt from tedious paperwork, you must still acquire the standard set of permits and licenses of your industry. If you seed the term DBA, it stands for “doing business as” and is frequently used to indicate the existence of a sole proprietorship.

Unlike corporations, sole proprietorships are not treated separately by the IRS. This means that any profit derived from your sole proprietorship is treated as your personal income and is accounted for on your individual tax return. Any such income is taxed to you in the year it was received.

Yes. Unlike other forms of incorporation, you are personally liable for any of your sole proprietorship's debts or legal judgments against your business. This means that in order to satisfy debts owed by your business, debt collectors can come after your personal assets -- homes, cars, etc. For this reason alone, you should be extremely cautious about setting up a sole proprietorship.

Not necessarily. But every business is unique and there may be circumstances where a partnership, LLC, or some other kind of business structure is a better fit. You also may want to get more insight into the specific liabilities your sole proprietorship may face. Learn more by contacting a business organizations lawyer licensed to practice in your state.

You’ve probably heard of limited liability corporations (LLCs), limited liability partnerships (LLPs) and corporations. Sole proprietorships are business just like these companies, but they vary in a few key ways:

  • Sole proprietors are the cheapest business type when it comes to operational and other costs.
  • Sole proprietorships are the least complex of the legally recognized business structures.
  • Sole proprietorships are exempt from mandatory state registration laws.
  • Sole proprietorships don’t require formal paperwork.
  • Sole proprietorships don’t shield individuals from business related debts or liability.
  • Sole proprietorships don’t require a tax filing separate from personal income. Naturally, there are many differences between sole proprietorships and corporations, but these are some of the most noticeable hallmarks of them.


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