Government of India | NITI Aayog

Sole Proprietorship

What is a Sole Proprietorship ?

Sole proprietorship, as defined by the Govt. Of India, is a “one-man organisation where a single individual owns, manages and controls the business.”

One of the primary benefits is ease of formation, since a government registration is not required.

There are no fees to be paid for starting a one-man business on your own, and there is no government regulatory paperwork and compliance to be fulfilled. There are no minimum capital investment requirements, and the proprietor has full control and ownership stake.

You get to keep whatever profit or income you generate. Furthermore, the tax benefits of sole proprietorship prevent double taxation of the firm. You will file returns and pay taxes only in your personal name. There are no separate income tax returns to be filed and no tax to be paid by the firm.

In a Sole Proprietorship, only one person controls the business. Therefore, the owner and the business are considered as one entity. In other words, there is no difference between the sole-proprietorship and its owner.

Features of Sole Proprietorship :

Some unique features of sole-proprietorship are:

  • Full control over the business.
  • Unlimited liability of the owner.
  • No perpetual succession.
  • Complete freedom to make decisions.
  • No separate legal entity
  • Tax benefits such as paying taxes at individual tax rates, and not corporate rates.
  • Ease of formation and lesser compliance requirements.
  • Fast and easy decision making

Disadvantages of Proprietorship Firm

  • Lack of Resources.
  • Unlimited Liability.
  • Lack of Credibility.
  • Can not raise funds easily.
  • Can not add Partners.