What is a Sole proprietorship / Individual business?

A sole proprietorship or Individual business refers to an unincorporated business. This category includes freelancers, independent contractors, and consultants. At times, individual business persons are also known as “solopreneurs.” A person running such an unincorporated business pays personal income tax on profits earned from his entity.

A sole proprietorship stands among the simplest forms of businesses to establish. However, it still requires some mandatory paperwork. Before a person starts an individual business, he/she needs to do Individual registration.

Why opt for a Proprietorship Firm?

• Easy to Start : This category of business, known as the proprietorship business, is one of the easiest to start with as it requires no elaborate registration process, and you can become with just some paperwork. However, after setting up a proprietorship firm, it may become a little challenging to open a bank account or have a payment gateway by the name of your firm – as a lot more registration and paperwork is involved in the same. However, with the right guidance, it’s all a child’s play!

• Freedom to have any name : Since the firm is not registered, the proprietor of the business is free to choose any name for their business. The only condition for the same is that the name chosen by the proprietor must not fall under a registered trademark. They are free to change the names of their business as per their will However, it also comes with a downside that anybody can use a business name similar to yours as it is not registered particularly under your name.

• Taxation : A proprietorship business with an income of less than INR 2 lakhs is not required to pay any income tax. The proprietor is liable to pay taxes as an individual and not as a business. On the other hand, if the income of the business exceeds INR 10 Lakhs per annum, a business is not liable to get any benefits from the proprietorship.

• Undivided Profits : In proprietorship businesses, there is no regulation or rules over the money earned by the business as there is only one owner of the company. The owner is the only person who accumulates the profits earned by the business. Sole ownership gets rid of the benefit related conflicts in the firm. Money comes in to facilitate and maintain the processes in the firm.