Are you considering starting a small to medium-sized business where you will be the sole owner of the company and its operations? A proprietorship business might be the option for you. A sole proprietorship is the oldest form of business in the world, and it’s also one of the most hassle-free ways to run your business.
As a sole proprietor, the business will be registered under your name, and you and your company will be considered a single entity for tax purposes.
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Sole proprietorship, also known as a sole trader, an independent businessman or a business owner,is a type of business that is owned and controlled by a single person and in which there is no legal distinction between the owner and the business entity.
The sole trader shall receive all revenues (subject to company-specific taxation) and shall have unlimited liability for all losses and debts. Each asset of the business is the owner's assets, and all the debts of the business also belong to owners.
Conversion of Proprietorship to Private Limited Company –
One-person companies are a perfect model for medium-sized business organizations. One-person company is an enhanced and better type of sole proprietorship company and is, therefore, a smart business decision to transform sole proprietorship into a One-Person Company. This business structure gives full control of the business to the sole owner while at the same time restricts its responsibility to protect its personal assets since the owner of this company is a shareholder.
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The conversion of a sole proprietorship into a limited liability partnership (LLP) is a good alternative for anyone looking to grow their small and medium-sized business. As it has only one man, it is not possible to convert a sole proprietorship directly into an LLP. It can be achieved either by closing the ownership and registering an LLP or by involving someone else in the business and making him a partner and then converting him to an LLP.
Proprietorship | Partnership | Limited Liability Partnership | Private Limited Companies | One Person Company | |
---|---|---|---|---|---|
Registration | No formal Registration | Optional | Registered with MCA | Registered with MCA | Registered with MCA |
Minimum Members | One person | Two person | Two person | Two person | Two person - One Director, One Nominee |
Maximum members | One person | Twenty | Unlimited | Two Hundred | Two person - One Director, One Nominee |
Foreign Ownership | Not allowed | Not allowed | Allowed | Allowed | Not allowed |
Perpetual Existence | No | No | Yes | Yes | Yes |
Statutory Compliances | Minimal | Minimal | Low | High | High |
Know More | Know More | Know More | Know More |
In sole proprietorship tax is to be paid according to slab rate for the relevant assessment year.
To begin a Proprietorship, only one person is required and only one Promoter can have a Proprietorship.
The sole proprietorship is not a legal entity. A sole proprietorship can operate under its owner's name or it can conduct business under a fictitious name. The fictitious name is merely a trade name-it does not create a separate legal entity from the sole owner.
Proprietary companies are taxed as individuals under the Income Tax Act. In the case of a business owner, therefore, a tax audit is necessary if the sales turnover exceeds INR 1 crore.
Yes, Proprietorship can be converted into a company.
Proprietorship firms do not have a Certificate of Incorporation. These firms have a registration.
Sole proprietorship, also known as a sole trader, an independent businessman or a business owner, is a type of business that is owned and controlled by a single person and in which there is no legal distinction between the owner and the business entity.
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