Sole proprietorship firm

 

1. A proprietorship business is not considered to be separate and independent entity and is treated same as proprietor (owner) of the business in the eyes of Law.

2. The tax returns are filed for the owner and not for the business. If a person is owner of more than 1 businesses, all incomes are clubbed to arrive as single figure and then taxes are calculated. The tax rates applicable are Individual tax rates and not business tax rates.

3. Lower compliances requirements for individual nature of business. No liability towards MAT (Minimum Alternate Taxes).

4. Audit of accounts are not mandatory until business crosses specified turnover.

5. No sharing of profits (losses) is involved. Everything is retained by the owner.

6. RBI (Reserve Bank of India) has now directed all Banks to follow the KYC norms (know-your-customer norms) strictly before opening a Bank account.

7. Proprietorship business should have at least 1 or at times 2 valid Registrations with any government authorities before they can open a new Bank account. These registrations should be in the name of business and not proprietor.

8. The owner has unlimited liability for various activities. This means personal property of the owner is also considered as assets of the business and is used to settle any law suits or debts from debtors if any. 

Thank you.

However, additionally, if the owner of a sole proprietorship wishes to file a suit against another firm for breach of contract, will the owner then be governed by contract law, and the civil court have jurisdiction over the case, or will the case then be an exception under Section 9 of the CPC and fall under the Companies Act, 1956?

1. Kindly note; a sole proprietorship firm is not a legal entity which can sue or be sued in its own name. Such suit relating to or against the affairs or claims of a proprietorship concern has to be brought or made against the person who is the sole proprietor. 2. Where a dispute arises from the general law of contract, i.e., where relief’s are claimed on the basis of the general law of contract, a suit filed in a civil court cannot be said to be not maintainable, even though such a dispute may also constitute an “industrial dispute” within the meaning of S. 2 (k) or S. 2-A of the Industrial Dispute Act,1947.

A sole proprietorship is easy to start as it requires only simple registrations such as GST, MSME. Also, only simple documents are required such as PAN Card, Aadhaar Card, etc. along with Proof of Address. Due to this fact, a Sole Proprietorship can be started effectively within a few days.

For more Info have a look at this - https://www.legalfidelity.com/proprietorship-firm-registration/

Regards, Team LegalFidelity

LegalFidelity.com