A sole proprietorship is a business establishment that is owned and managed by a single person. It is very popular among the unorganized sector, particularly small traders and merchants. Registration for such type of entity is not mandatory in nature. It is cost effective business as there is no compulsory need for registration, thus became cost effective and compliance free.
The simplicity of a sole proprietorship makes this form of business structure extremely popular among small traders, retailers, freelancers, and other self – employed individuals. What begins as a sole proprietorship may be transformed into another, more complex business structure, such as a partnership, LLP or company, as the case may be, with the growth of business entity. The PAN No of the owner is termed as PAN No of the firm.
Although the registration of the firm not mandatory, but if we want to take any legal action against any of our creditor to recover the amount due to him. We cannot sue him until we are registered. So to make our bad debts recovery through court we have to get the entity registered.
Annual Compliance : The financial result of the firm may be treated as income from business/profession of the owner and the owner ITR filing with income/loss from business & profession is regarded as firm income tax return. If the firm has taken GST registration then monthly/quarterly/annual filing of GST Return is mandatory as per scheduled fixed by govt.
Registration: As mentioned earlier, There is no specific protocol to register a sole proprietorship firm. The registration at any one place may be treated as registration of sole proprietorship firm. Depending upon its requirement, It may take any one licence as registration of the firm.