How to Register a Sole Proprietorship in India (एकल स्वामित्व)

For the last couple of decades, India has been a great place to start a business. Because of its business-friendly laws, cheap operational costs and a sustainable business economy, this country has become the go-to for many ambitious entrepreneurs, both local and international.

India still offers so much potential, especially if you are thinking of becoming a sole proprietor. Since India is such a great startup ecosystem, all you really need is a good idea and you can be on your way to establishing your business’s name and reputation. To make things even easier for you to start, we are offering you some advice on how to register a sole proprietorship in India.

Disclaimer: This article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Do you have to register your sole proprietorship in India?

The short answer would be “No, it isn’t”. However, even though it is not obligatory, there are still some reasons why you should consider registering your small business. First off, you’ll be able to open a bank account under your company’s name. Banks in India require you to register your company if you want it to have a separate bank account. Secondly, by registering your business, you can trademark it to ensure no one else does business under the same name. This can help you create a brand and make your sole proprietorship well known in the industry, as well as help you attract clients through online channels. What you should keep in mind, though, is that registering your sole proprietorship is not the same as trademarking your brand. These are separate processes, both of which can help you establish a more successful business.

Shop and Establishment Act

As a sole proprietor in India, you can choose to register your business under the Shop and Establishment Act. In order to register like this, you must have a shop. This entails a place where you sell your goods or provide your services. However, this doesn’t include factories, commercial establishments, or any type of dining or amusement locales. Only if your sole proprietorship fulfills these parameters can you register using this Act.

Registering a sole proprietorship through MSME

If you don’t meet all the criteria that allow you to file your business under the Shop and Establishment Act, you can register through MSME. The Ministry of Micro, Small and Medium Enterprises is a government body that helps people establish, register, and conduct their small businesses in India. Even though registering your sole proprietorship as an SME (Small or Medium Enterprise) is not mandatory, it can still be very beneficial for your business. Namely, registered enterprises get better interest on their loans, for conducting business, and are eligible for some grants the government uses to provide incentives for small business owners.

Registering your sole proprietorship as SME is fairly easy and you can do it online.

GST - Goods and services tax

If your business deals in any kind or form of exchange of goods and/or services, you can apply to register with GST. This is a single tax that encompasses all of your transactions concerning goods and services. Those well-versed in taxation in India might be familiar with VAT and Service tax registration. The GST replaces those two with a single taxation system that requires only one registration. So, this is basically a single tax that can encompass everything your sole proprietorship does. Additionally, GST is a great way of setting up an identity for your business and making those first steps towards creating a strong brand.

However, applying and registering for GST might not be the best move for your particular business as it entails some additional fees and legislature. The main deterrent from this kind of registration is the fact that you will need to follow all the compliance laws. Additionally, if your sole proprietorship in India has an annual turnover of less than Rs. 20 Lakh, applying for GST is not mandatory.

Documentation required

Depending on which registration you decide to go with, you will need to obtain certain documentation:

• Aadhaar card - this is a 12-digit code unique for every person and it is acquired by providing your legal and biometric data to UIDAI (Unique Identification Authority of India). This ID number is essential to any and all registration processes. So, if you decide to register your sole proprietorship in India, you’ll definitely need it.
• Pan card - a Permanent Account Number allows you and your business to file for taxes and tax returns. If you’re planning on registering your sole proprietorship in India, this is a must
• Bank account - once you have your Aadhaar and PAN, you’ll be able to open a bank account for your business. Keep in mind that in order to open a designated bank account for your sole proprietorship, you’ll definitely need to register your business.
• Registered office proof - No only will you need to provide the address of your offices (or place of business) but you will also need to include a No Objection Certificate from your landlord

Rely on Deel when hiring contractors

Apart from up-to-date legal advice on compliance laws, Deel provides a great way to increase the range and reach of your business. As a sole proprietorship in India, with a growing business, you might work with contractors from all over the world. Deel allows you to get the most out of your contractor experience by providing you with a single, centralized platform that takes care of all the hiring documentation for you. You can generate contracts, automatically invoice and streamline payroll for independent contractors, all in a single platform with full compliance regarding the local laws and regulations. Additionally, Deel allows you to manage payments in various currencies and provides support whenever you need it.

In case you're looking to hire employees from India, rather than contractors, check out this page to learn what it may cost you.