A Sole Proprietorship is Refers to the Business that is Operates and Run by Single Person who Gains all the Profit and has Unlimited liability for all losses and depts.
It also known as sole traders and directly a ownership, it’s a type of business organisation in which there is no valid variations between the operators and the Business. And manage by one single person if they have other workers working for him.
The single owner operates the business and fully answerable for all its debts and liabilities. The owner takes all the gains and influence for all the losses and the debts. Every advantage and debts of the business is kept by the owners. Its means that the business men has no less liability than if they acting as a sole alternatively as a business. Example includes shops, Local clinic doctors, local restaurants, home based business etc.
MERITS OF SOLE PROPRIETORSHIP
The benefit of sole proprietorship as comparison to other forms of business
- QUICK TAX PREPARATION- As an sole proprietor , as comparison to other corporation taxes filing is generally easier. we can directly file separate tax returns of our income, with your gain and losses. Your separate and business income examine the same and implications of self – employed tax will put in
- LESS START UP COST- The reality of small businesses and start ups is limited finances. Starting up and managing a business include higher start up cost and particular forms. Its also rare for lowyer to involve in to set up a business.
- EASY TO HANDLE MONEY - As compare to legal organisation handling the money for the business is easier in this corporations. No need to pay payroll set to ourselves. Set up different bank account for to make is easier, separate business funds and business activities.
- REGULATIONS OF GOVERNMENT - It also have an effect on minimum rules and regulation of government. In which state they do business, they need lincensing requirements. They also have to do pay attentions on local regulations. In this business the paper work is less as compare to large corporations. That’s why they work quite easily. And under this they don’t have to pay corporate tax .
DEMERITS OF SOLE PROPRIETORSHIP
The main Disadvantages to be a sole proprietorship
- UNLIMITED LIABILITY- In the form of sole proprietorship , is oneself answerable for all the losses and action of the company. Different from company or LLC, your business don’t have be as a separate legal entity. For that reason all of your particular substance and benefits linked to the business.
- LACK OF FINANCIAL CONTROLS- The insecure formation of a proprietorship won’t essential financial statement. thus, the absence of accounting control can effect in the holder being careless about financial matters. It may be drop down beyond in payment or not getting pay on time. If financial controls are not strictly managed ,it can be serious issue.
- DIFFICULTY IN RAISING CAPITAL- Get larger your small business will needs to takes benefits of new market and more chance. An separate investor has less peace of mind about the use and safety of her/his investment. And its more difficult to formalise the investment. And other types of organisation have more documentation.
WHEN GST REGISTRATION REQUIRED FOR SOLE PROPRIETORSHIP
- When annual turnover is more then 40 lakh.
- When firm sale products or service to one sate to another state.
- When there is e-commerce business.
- When firm want to claim ITC on purchase.
- On voluntary basis.
DOCUMENT REQUIRED FOR GST REGISTRATION FOR SOLE PROPRIETORSHIP
- PAN card copy of firm owner.
- AADHAR card copy of owner.
- Electricity bill, water bill of business location, telephone bill, and rent agreement if office is on rent
- Owners bank statement , cancel bank cheque, passbook front page copy of owners.
- Photograph of owners in passport size.
- In this no legal variation between the single persons and the business. So, each benefit is owned by owner or proprietor .
- Under sole proprietorship the business can use any name, trade name and business name instead of her legal name.