A sole proprietorship is a business that is owned, managed and controlled by one person. It is one of the most common forms of business in India, used by small businesses operating in the unorganized sectors. Proprietorship concern is very easy to start and have very minimal regulatory compliance requirement for getting started. However, after the start-up phase, proprietorship business model do not offer the promoter a host of other benefits such as limited liability, separate legal entity, independent existence, transferability, etc., which are desirable features for any business. Therefore, proprietorship business model are best suited for unorganized, small businesses that will have a limited existence. A summary of advantage and disadvantage of proprietorship business model are as follows:-
| Advantage | Disadvantage |
|
|
| Proprietorship
Concern | Partnership Firm | Limited Liability
Partnership (LLPs) | One Person Company
(OPC) | Private Limited
Company | Public Limited
Company | |
| Registration
Requirement | Not required | Not mandatory | Registration must | Registration must | Registration must | Registration must |
| Registering Authority | No Registration Required | Registrar of Partnership | Registrar of Companies | Registrar of Companies | Registrar of Companies | Registrar of Companies |
| Suitable for | Small businesses in unorganised sectors | Small businesses in unorganised sectors | Small to Medium businesses in organised sectors | Small businesses in organised sectors | Start up, Growing and Medium size businesses in organised sectors | Medium to large businesses in organised sectors |
| Name Availability | Anything. However should not breach trademark or copyright | Anything. However should not breach trademark or copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright | Anything with prior approval. However should not breach trademark or
copyright |
| Time required for
Setting-up and start of business | Instantly | Instantly | Instantly after setting-up, however incorporation may take 7-10 days | Instantly after incorporation however incorporation may take 7-10 days | Instantly after incorporation however incorporation may take 7-10 days | Instantly after incorporation however business can be started only after
securing Certificate of Commencement of Business after incorporation, which
put together may take 15-21 days |
| Investment
flexibility | Limited | Limited | Limited | Limited | Unlimited | Unlimited |
| FDI Permission | Restricted | Restricted | Flexible | Restricted | Flexible | Flexible |
| Legal Recognition | Not a separate legal entity | Semi-Separate legal entity | Separate Legal Entity | Separate Legal Entity | Separate Legal Entity | Separate Legal Entity |
| Liability Protection | Not Available | Not Available | Limited | Limited | Limited | Limited |
| Existence /
Continuity | Limited | Subjective | ||||
| Min./Max. Members /
Owners / Shareholders | Minimum: 1 | Minimum: 2 | Minimum: 2 | Minimum: 1 | Minimum: 2 | Minimum: 7 |
| Minimum Paid-up
Capital | Nil | Nil | Nil | Nil | ₹ 1 Lakh | ₹ 5 Lakh |
| Income Tax | At Slab Rates | At 30%+SC+Cess | At 30%+SC+Cess | At Slab Rates | At 30%+SC+Cess | At 30%+SC+Cess |
| Profit Distribution
after Tax | Exempt | Exempt | Exempt | Exempt | Taxable | Taxable |
| Statutory Compliances | Minimum | Moderate | Moderate | Moderate | High | High |
| Main applicable laws (This is indicative
list of laws, there could be other laws applicable to a peculiar business
activity / entity) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) | Income Tax Act Goods & Service Tax Value Added Tax (limited) Excise and Customs Act* (for manufacturing and / or importers /exporters) |
| Licensing
Requirements (This is an indicative list of licenses. Some
other licenses may also be required depending on underlying business activity /
entity) | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License | -Trade License - Import/Export License - Excise & Customs License - Food & Beverages License |
| Periodical
Compliances | Tax & Other Return | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns | Tax & Other Returns |
| Liquidation /
Dissolution | Easy | Easy | Some legal formalities | Some legal formalities | Moderate legal formalities | Moderate legal formalities |