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Sole Proprietorship Formation



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A Quick glance of Sole Proprietorship Formation

A sole proprietorship firm is a business entity that is owned, controlled and managed by only one member. It is not a legal entity.

The single owner is also called as Sole Trader. It simply refers to a person who owns the business and is personally responsible for its debts, losses and liabilities of the business.

It is especially suitable if you're planning on starting a one-person business and you don't expect the business to grow beyond yourself.

They are easier to set up than other business entities. A person becomes a sole proprietor simply by running a business. The functional advantage of a sole proprietorship is that the owner maintains 100% control and ownership of the business.

There is no need to share profits with anyone because he is the only investor who has invested money in the business. Income and losses are taxed on the individual's personal income tax return.

Sole proprietorship firms in India are not regulated under any one law to protect the interest of individual proprietors and therefore, this type of business organization is the simplest one in terms of registration and compliances.

With introduction of One-person Company in Companies Act, 2013, the legislature has taken up a step towards regularizing and protecting the interest of entrepreneurs who wish to do business solely. There is no formal procedure set under the law that can bring it into existence.