What is Sole Proprietorship? Full Information

What is Sole Proprietorship ?

The term “Sole proprietorship” itself explains the meaning of what it is all about. The word sole means “solo” or “single” whereas the word proprietor means “owner”. Sole proprietorship is basically a business entity which is owned by a single owner or a limited liability partnership.


It is also known as Solo tradership, Individual entrepreneurship or Proprietorship. It is the business where there is only a single person who plays all roles be it owner or shareholder. Whereas when discussing the assets and liabilities of such business entities, it is very much clear that assets and liabilities are owned by the same person.

In addition, the owner has the privilege to decide the legal name of his company other than his own name. Also, it should be a project where a sole proprietor is always open to hiring more employees in his company so he doesn’t have to work alone for his business unit.


Under this there is no such difference between the owner and the business. It is considered to be one of those most preferable and famous business types because such business entities can easily be formed at nominal cost. 

What is the process of Sole proprietorship registration ?

Sole proprietorship is one of those businesses which does not have any mandatory registration process.

As mentioned earlier, it is very easy to start such a business at nominal cost. However, if someone wants to get there sole business registered, it involves three ways to do same which are as follows:-

  • Sole Proprietorship registration under Shop and Establishment Act
  • Sole Proprietorship Registration through Udyog Aadhaar under Ministry of MSME
  • Sole Proprietorship registration through GST Registration

Now, let’s get into the details of how these ways are actually operated when it comes to the registration of Sole proprietorship. 

Sole Proprietorship registration under Shop and Establishment Act

When a proprietor starts a personal business, he must definitely get his property registered, which he is using for business purposes or we can say, he has to get his property to work in a particular area. License must be obtained, ownership. And, so when the business gets registered.

Thus, this is also one of the options to get yourself registered as a sole proprietor. 

Sole Proprietorship Registration through Udyog Aadhaar under Ministry of MSME

Every proprietor when intent to register their sole proprietorship, they have to get themselves registered under the SME (small and medium enterprise) as per the provisions of the MSME Act.

For this the proprietor is basically required to fill the online application and thus under the Ministry of MSME, they are given Udyog Aadhar number and hence get registered. Udyog Aadhar number doesn’t play the vast role but it gives the sole proprietorship pinky points when the owner applies for loan.

Sole Proprietorship registration through GST Registration

This is one of the mandatory ways by which you can get your sole proprietorship registered with the government. GST is a tax that has to be paid by a business even if it conducts its business online.

Every business in India is entitled to receive grant service tax from the customers and for that they need to have GST number which one receives after getting registered themselves.Moreover, there is a consideration for the sole proprietors, that it’s not a compulsion for them to get themselves registered if there annual turnover is less than 40 lakhs. 

So you can easily select a way out of these methods to get yourself registered as a sole proprietorship according to your suitability. Moreover, there are suitable documents required while getting registered which are as follows :-

  • PAN Card of the proprietor
  • Aadhar Card of the proprietor
  • Passport size photograph of the proprietor
  • Office proof
  • Bank Statement copy that contains bank account number, IFSC code, and address

What is a Private Limited Company?

What is the need to get the Trademark registered in a sole proprietorship?


Registration of the trademark is important for those sole proprietorship who are willing to operate themselves under a specified tag. This method also plays an important role for those proprietors who want to stay away from the hustle of being copied, which is even good in the evolving scenarios.

What are the various kinds of licenses required while operating a sole proprietorship ?

There are certain licenses required to be acquired by a sole proprietor which are as follows :- 

These are the basic licenses required as per the nature of the business to survive in a market without any hustles.

What are the features of the sole proprietorship?


Here are listed some of the features of sole proprietorship which makes it stand out of the crowd :-

  • Single Individual :- The basic and primary characteristic of a sole proprietorship is that it is operated by a single individual who himself performs every role in his business which includes every step from being the founder of the sole proprietorship to being a shareholder of the business. 
  • Required registration under special cases – Sole proprietorship requires registration only on special terms which is not same with the other business entities. We have already gone through the basic requirements earlier in the article.
  • Sole proprietorship is also free to hire the employees – Whereas, we know that sole proprietors themselves are a one man army, they are not bound by the rules of others which definitely doesn’t mean that they cannot hire people from outside. They are free to hire the employees as per their conveniences.
  • No GST registration – Sole proprietorship is free from getting themselves registered for filing the GST if their annual turnover is less than 40 lakhs which for sure make it stand out of the crowd.

What are the pros of a sole proprietorship ?

The sole proprietorship definitely brings with it the independency and many other plus points which are useful to a proprietor, here is the list of some of those which are as follows :-

  • Easiest form of business – Sole proprietorship is considered as the easiest form of business, when it comes to getting operated in the practical world. For example – When we walk through the streets we see the small shops all over, these are basically the sole proprietorship.
  • Not entitled to share their profits:- Sole proprietorship is one man army where no one else is involved at least in the startings, hence sharing of profits is also not done. Reason being when two people are involved in a business then the sharing of the profits gets involved and without them there is no need to find out the share.
  • Lesser taxes:- When a proprietor operates an individual business then the ultimate stage is of lesser profits which means the lease turnover over the books which would lead to the lower amount of taxes on its own. And, hence the amount of taxes gets lowered on its own.
  • Easy to start:- Sole proprietorship doesn’t involve much of the legal steps or the mandatory steps to be performed when one is starting the business. Hence, it becomes easy for one to start their own business without being involved in all these hustles which is definitely a good point compared to others.
  • No legal formalities:- When someone is starting their individual proprietorship, there are not so many steps involved in getting themselves registered which works as the desert on the platter. Hence, it becomes easy for one to start a business on their own as per their convenience.
  • Minimum investment:- Sole proprietorship is something which doesn’t require much investment at the initial stage because the owner is not required to be worried about the salaries and the allowances to the employees. Therefore, as per the company law, 2013 there is no such investment assigned to the sole proprietorships.
  • One decision making:- As, there is a single person involved in all the processes of the sole proprietorship. Therefore, there is no requirement to think about the decision making of a company.
  • No need of getting the books audit:- As there are not many legal formalities involved in such businesses which leads to profit of not getting audited by the chartered accountant.

What are the cons of a Sole proprietorship ?

As every coin has two faces and hence sole proprietorship even is not far apart from the process. It for sure involves the pros and this also has the cons to it. Here is the list of cons it involves –

  • Less management skills:- In a sole proprietorship, being operated by one individual there are not many people involved in the business at least in the initial stage and that confines the probabilities of the new business ideas to get involved in the proprietorship.
  • Limited investment:- When a business is started, there are the fair chances of two to three people getting involved in it and when this happens in initial stages each of the owner or the co-founder is entitled to bring with themselves some or the other investment and thus that makes it a good amount.
  • Absence of the big picture:- When you are starting a sole business, there are higher chances for you to not imagine the big picture of the business because the lack of capabilities of a group at various stages can lead to this. Thus, it becomes harder for one to imagine the bigger picture of their businesses.
  • Risk of wrong decisions:- When there is a single mind performing all the activities, there are the chances of exhaustion and thus there are chances of doing something wrong which could not be good for business and thus it could lead to the losses in a business. The chances are less when multiple people are involved in the foundation of a business.
  • Single person includes all the losses:- When the owner is one, there is no chance of sharing the profits but at the same time if we look at the other faces of the situation we will find what if the losses are there ? In case of losses as well, there would be a single person incurring everything and that could even spoil the balances of one’s personal and professional life.
  • No large scale economies:- When the investments in a business are not so huge, there are the chances that the large companies would not be interested to collaborate with you, which would lead to the confinement of the scopes of one being a proprietor, which for sure isn’t good news.
  • Limited scope of employees:- In a sole proprietorship, the scope of hiring trained and qualified employees is much lesser as compared to other forms of businesses because the opportunities they are being put forth are confined by looking at their budgets.
  • Unlimited liability:- In a sole proprietorship, if the business owner fails, there is a possibility that he may immediately run out of money that he could have saved as savings for himself. And it will also affect their personal and social life.

So, this was all about sole proprietorship, how it operates and how everything happens around it. The advantages (pros) and disadvantages (cons) are also mentioned here which could be helpful for one while getting involved in this kind of business. Sole proprietorship is a business which is very easy to start but at the same place in the longer term it confines one to achieve their threshold of success.

Whereas, if you are thinking to start one, I would suggest you to start the business as a sole proprietorship which would help you to be saved from the immediate hustle of registering your company, GST filing which is definitely a very good part but at the same time the Companies Act of India, 2013 has gave us such provisions that at any point of time when one start earning enough amount, we are free to switch to the other form of businesses which is definitely helpful to grow as a business in a longer run.

Along with this you also see Top 10 low-cost investment business ideas with high profit-making at long term

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