Can I start a business without registration in India? – Sole proprietorship Vs. Limited Company in India

1.0 Introduction

Starting your own business is everyone’s dream and challenging task, specially when there are tones of options available before entrepreneur, there are chances of a larger confusion about which types of entity one should form. The decision of selecting right entity is a crucial and fundamental requirement and it depends upon number factors.      

2.0 What do you mean by starting a business without registration?

Starting a business without registration means you are starting your business without any government registration. E.g. suppose you provided a technical consultancy to Mr.A and you charged Rs.10,000/- for the same. Now you took that money into your personal saving account.

In other words, though you don’t have a business registration yet you are able to do the business. But in India, you cannot do business with a savings account as it has been restricted to certain number of transaction.

3.0 The most famous unregistered from – the Sole proprietorship

To operate a business without registration you need a current account. Now to open the current account, the bank will ask you for any government registration. The government registration can be MSME registration, Shop & establishment registration or GST registration.

Once you have any of the aforesaid registration, you can open a current account and can do the business in India. This type of registration is called sole proprietorship registration. Let us proceed and learn more about the unregistered and registered form of business.

4.0 Types of Registration – the unregistered and registered form

In India, the registered form of business is the one which has a separate legal entity. In other words, the entity which is being treated separate from its owners like company, LLP etc.

As said, every form of business offers has its own pros and cons but the should be made in the light of not only current plan but also keeping in view the future, there are generally two categories of Company i.e. registered business and unregistered business.

• Registered business: Under this registration as a registered companyor LLP is compulsory for running a business which quite complex and costly process. Further, it also adds to the yearly compliances.

• Unregistered business: These are basically which are not considered as separate legal entity such as sole proprietorship, partnership etc.

5.0 Why people choose to register sole proprietor instead of private limited company

Save your money. Saving money is just like making money. This above proverb is in consonance with the reasons why one should go for an unincorporated form of business, for example setting up proprietorship firm which is wise decision because of following reasons:

• Unlike Company, a sole proprietorship does not require any kind of registration with the Government or with any authority.

• One can operate the business under their own name or under the firm name or the way the one want to start and it is really economical and easy to form and it is helpful a lot in the long run.

• However, there are some businesses licenses which you need to take and it depends on the type of business you are planning to start.

• Choosing sole proprietorship does not add to any yearly maintenance cost.

• Following are the list of documents which are basically required for processing the registration of proprietorship.

• Pan Card of the Proprietor
• Copy of Aadhar Card/Voter Identity Card
• Electricity/ water bill/ Telephone bill/ Mobile bill of business premises

6.0 Sole Proprietorship Firm – Register GST and start your sole proprietorship in India

The simplest way to start your own business is to acquire GST license, like Goods and service tax registration. Here are four steps that need to be followed to start your own business in India:

• If you are trader, manufacturer, whole seller, retailer, and services provider Goods and Service tax registration is necessary (maximum cost will be Rs 2000 including registration and it will take three to four working days).

• Open a current account with any bank of your choice with the license obtained. Now, you can run your business easily.

• For GST tax, you just need to file monthly or yearly returns, which can cost you Rs 2,000 or 16000 respectively.

7.0 Conclusion

Further, once your business is established, you always have the option to convert it into a private limited company, LLP or any other form of your choice.If you planning to set up proprietorship firm under GST registration, kindly email us at info@hubco.in.

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