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Sole Proprietorship


This is the most easy business entity to establish in India. It doesn’t need its own Permanent Account Number (PAN) and the PAN of the owner (Proprietor) acts as the PAN for the Sole Proprietorship firm. Registrations with various government departments are required only on a need basis. It is not possible to transfer the ownership of a Sole Proprietorship from one person to another. Assets of such firm may be sold from one person to another. Proprietors of such firms have unlimited business liability. This means that owners personal assets can be attached to meet business liability claims.

Salient Features of Sole Proprietorship

  • Ease of Formation
  • Ease of formation is its most important feature because it is not required to go through elaborate legal formalities. No agreement is to be made and registration of the Proprietorship is also not essential. However, the owner may be required to obtain a license specific to the line of business from the local authorities.

  • Minimal cost

    Capital requirement of the Proprietorship is introduced wholly by the owner himself and depends largely on his own savings and profits of his business or unsecured loan from friends and relatives.

  • Lesser compliances
  • As compared to other business forms, there are fewer legal compliances with respect to incorporation, operation and taxation.

  • Independent control
  • As Sole Proprietor is the single owner of his business, he surely has independent control over his operations, though he may engage the services of a few others to carry out the day-to-day activities.

  • Single Promoter
  • This is a form of business entity that can be promoted by a single individual who is its Owner/ Proprietor. Owner alone enjoys the benefits or profits of the business and he alone bears the losses.

  • No corporate tax liability
  • As per the direct tax laws of India, the sole proprietary entities are not liable to pay flat corporate profit tax, unlike other business forms. Rates of Taxation are as applicable to Individual.


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