Incorporation of a Sole proprietorship Concern

• A Sole proprietorship is an enterprise owned exclusively by one natural person and in which there is no legal distinction between the owner and the business entity. The entrepreneur exercises his activity without having created a distinct legal person.​​​

The control of the business is solely in the hands of the single proprietor/owner. A single person who wants to start a business from home or on a premise with a minimum amount can opt for this form of business type. Sole traders rely on their own savings, bank loans or loans from friends and family to finance their businesses.

Advantages of a Sole proprietorship:

1. Startup costs are low.
2. Establishing and operating a business is easy.
3. The sole trader retains all profits for himself.
4. The sole trader makes all the decisions.

Disadvantages of the sole proprietorship:

1. Heavy workload.
2. Unlimited liability.
3. Difficulty in raising finance.
4. No perpetual succession.

Is registration mandatory?

• Registration is not mandatory for the sole proprietorship business, if you want to get registered then you can register under the MSME(Micro, Small and Medium enterprises). However, certain businesses need licenses/permissions from the appropriate authorities. Eg. the Food business needs a license from FSSAI.
• 
  
• Similarly, every Shop, Establishment, and Commercial establishment with premises where any business/trade is carried on or any service is rendered to customers then such an establishment should get registered under AP Shops & Establishments Act, 1988. Some businesses may need a trade license. It is a document/certificate that gives permission to the applicant (person seeking to open a business) to commence a particular trade or business in a particular area/location.

What is MSME?

MSME stands for Micro, Small, and Medium Enterprises. In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are classified into two divisions.

1. Manufacturing enterprises – engaged in the manufacturing or production of goods in any industry
2. Service enterprises – engaged in providing or rendering services.

On 1st June 2020, the Union Cabinet headed by Prime Minister Narendra Modi officially revised the MSME definition.

CLASSIFICATION

MICRO

Investment < Rs 1 crore

and turnover < Rs 5 crore

SMALL

Investment < Rs 10 crore

and turnover < Rs 50 crore

MEDIUM

Investment < Rs 50 crore

and turnover < Rs 250 crore

Documents required to register as MSME:

1. Aadhaar card
2. Pan card
3. GST number, if you have one.

Registration process:

1. Go to udyam registration portal.
   
2. Click on new enterprise, who are not registered as MSME.
   
3. Enter Aadhaar card number and the name as per Aadhaar.
   
4. Enter OTP sent to Aadhaar registered mobile number.
   
5. Select the type of organisation and enter the PAN number.
   
6. Select yes or No whether you have filed the ITR(Income tax return).
   
7. Select yes or No whether you have GSTIN.
   
8. Enter the mobile number and email id.
   
9. Fill up the communication and address details.
   
10. Enter if you have any previous UAM registration number.
    
11. Enter the bank details and major activity unit.
    
12. Enter NIC code and number of persons employed.
    
13. Enter the investment in plant & machinery and turnover.
    
14. Select yes or No for GeM and TReDS portals.
    
15. Submit the final OTP number.
    
16. By this, your UDYAM registration will successful and you download the registration certificate.

Benefits of getting MSME certificate:

1. It is a one-time and permanent registration.
2. The online system is fully integrated with income tax and GSTIN systems details on investment and turnover of the enterprises are taken automatically from the government database. Exports are not taken part in the calculations.
3. Become eligible for priority sector lending from bankers.
4. Section 43B of the Income tax Act, by which any expenditure in relation to purchases/services hired from MSME, will be allowed only if such expenditure is paid within the time limit specified in section 15 of Micro, Small and Medium Enterprises Development Act, 2006. The buyer is liable to pay compound interest with the monthly rests to the supplier on the amount at the three times the bank rate notified by RBI in case he does not make payment to the supplier for his supplies of goods or services within 45 days of the acceptance of the goods/service rendered. (Section 16)

By registering MSME under UDYAM portal you are also eligible for:

TReDS platform (www.invoicemart.com):- It is a trade receivables discounting system platform setup to resolve credit challenges faced by MSME’s. It is a joint venture between Axis bank and mjuction services.

Samadhaan:- It is a portal that functions as the delayed payments monitoring system. Only UDYAM-registered MSME can avail of this.

M1exchange.com:- It is a digital invoice discounting platform. HDFC bank is also a partner in this platform.