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Setting-up Sole Proprietorship Firm in India

Setting-Up Sole a proprietorship firm in India is not a herculean task that many believe it to be. Here, we will shed some light on the steps and processes involved. Then we hope to convince the sceptics that company registration in India is not as difficult as they believe, though sole proprietorship does not require any registration.

With that said, we will like to state that understanding the orientation of your business, in the beginning, is as important as the value you intend to offer. What are the business needs and targets you foresee? The answers to these questions will define the very type of registration that best suits your outfit as there are different types of company registration in India as designed by the Employees Provident Fund Organization (EPFO) under the Ministry of Labor and Employment.

As earlier stated, a sole proprietorship business does not require registering with the government, but there are few business licenses necessary to have when setting up one. One’s type of business (service or product based) determines what licenses to possess. With the licenses, business owners can open a bank account with their business name.

Types of Indian Business licenses

The Pan Card

The PAN card is necessary because, for your sole proprietorship, you will need to complete returns in your name. You can apply for the PAN card here which you will get in 7 days after application.

TAN (Tax Collection and Deduction Account Number)

Owners usually worry about tax before the registration of their companies in India. Taxation is important and to be on the right side of the law, a TAN will help owners accrue tax from customers and employees.

The Service Tax Registration

In the case that your establishment’s turnover goes beyond the 9 lacs margin, you are expected to pay a service tax (10%). You can get more details here.

VAT/CST Registration

While the Value Added Tax (VAT) is State-based, the CST is a type of central based taxation system. Being a business owner, you will need to secure a VAT registration for the transaction of in-state goods (the buying and selling of taxable goods across a particular state). For outstate transactions (the buying and selling of taxable goods across various states), securing a CST registration will be mandatory. You should also note that because of its nature, VAT regulations and fees differ from state to state. Here are info and guide on how to register and you can register through this link.

For Shops and Establishment License

Different states have their own Shops and Commercial Establishment laws that guide business owners, including sole proprietorships, on best practices while setting up their enterprise. Usually, the owner sends a statement to the appropriate body in the area. The statement often includes owner’s name, the name of the enterprise, postal address, and other details.  As soon as the fees and statement are respectively collected and approved, a registration certificate will be issued. The cost is determined by the size of a labour force of the company.

Importer-Exporter Code

The importer-exporter code is a 10 digits number similar to the PAN number which is given by the Director General of Foreign Trade (DGFT) TO Indian companies and business owners involved in international trade. Thinking about registering your sole proprietorship company in India? Do not forget to secure your importer-exporter code too. Here is for more details and to apply.

Professional Tax

As a sole proprietor with employees on its payroll, it is mandatory to get accrue a professional tax from them to pay the government. While some state stipulates the percentage of a professional tax, others do not, and few do not collect. Business owners are advised to inquire from their states the annual charge for the professional tax if applied.

Employee Provident Fund registration

For those whose labour force is less than 20 employees, the Employee's Provident Fund registration is waived. However, you can choose to undergo the registration. Companies with more than 20 employees are expected to register. It is free. The Employees Provident Fund Organization (EPFO) is in charge of this registration, and when employers are registered, an Open Provident account is opened on their behalf.

The Employee State Insurance (ESI) Registration

The ESI is essential for health insurance purposes for employees. Under the stipulated law, an ESI is compulsory for employing people in a company and 20 people in other setups. The ESI Act was established in 1948, and it provides that allocation must be made for employers and employees. ESI’s benefit in India is one of the reasons why you should get your company registered today.

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