Features of Sole Proprietorship
Sole proprietorship does not have a separate law to govern it. It does not require incorporation or registration of any kind. In most cases, only a license is required to carry out the desired business. As per current regulations of Govt. of India, GST registration is required if the annual turnover is more than 40 Lacks. Sole proprietorship allowed ease of doing business.
Risk in Sole Proprietorship
There is no separation between the owner and the business, so liability of the owner is also unlimited, if the business is unable to meet its own liabilities, it will fall upon the proprietor to pay them. All of his personal assets such as Land, Car, House, & any other kind of properties etc. may have to be sold to meet the liabilities of the business.
Profit of Sole Proprietorship
The owner is the only risk bearer in a sole proprietorship, If the business fails or suffers losses he will be the one affected but he also enjoys all the profits from the business. He does not have to share his profits with any other stakeholders since there are none.
No Separate Entity
The business and the owner are one and the same. No separate legal identity will be bestowed upon the sole proprietorship. So the owner will be responsible for all the activities and transactions of the business.
Continuity of Business
Sole proprietorship is entirely dependent on its owner. The death, retirement, bankruptcy, imprisonment etc. will have an effect on the sole proprietorship, most cases the proprietorship will cease to exist and the business will come to an end.
Advantages of Sole Proprietorship
- A proprietor will have complete control of the entire business, this will facilitate quick decisions and freedom to do business according to their wishes
- Law does not require a proprietorship to publish its financial accounts or any other such documents to any members of the public. This allows the business a great deal of confidentiality which is sometimes important in the business world
- The owner derives maximum incentive from the business. He does not have to share any of his profits. So the work he puts into the business is completely reciprocated in incentives
- Being your own boss is a great sense of satisfaction and achievement. You are answerable only to yourself and it is a great boost to your self-worth as well
Disadvantages of Sole Proprietorship
- One of the biggest limitations of a sole proprietorship is the unlimited liability of the owner. If the business fails it can wipe out the personal wealth of the owner as well and affect his future business prospects too
- Another problem is the limited capital a sole proprietor has access to. His own personal savings and money he can borrow may not be enough to expand the business. Banks and financial institutions are also wary lending to proprietorships
- The life cycle of a sole proprietorship is undecided and attached to its owner. If the owner is incapacitated in any way it has a negative effect on the business, and it may even lead to the closure of the business. A sole proprietorship cannot carry on without its proprietor.
- A sole proprietor also has limited managerial ability. He cannot be an expert in all the fields of the business. And limited resources may mean that he cannot even hire competent people to help him out. This may lead to the business suffering from mismanagement and poor decisions.
List of Document Required for Sole Proprietorship Registration
- PAN card,
- Adhar Card, and Photograph of the sole proprietor
- Bank account details- a copy of cancelled cheque or bank statement
- Address proof of office:-
–Own office – Copy of electricity bill/landline bill/water bill/ property tax receipt
–Rented office – Rent Agreement and No objection certificate (NOC) from the owner - NOC from other department if business is in special permission category such as Food, Drug, Medicine, Fertilizers etc.
