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How to set up your Sole proprietorship Firm in India

Kindly guide on how to go about starting a company as sole proprietorship in Bangalore? What kind of registrations etc are required? What other formalities are required?

Its always best to first decide on the businesses entity that you want for doing business. Every business has different needs and goals, and so does the type of registration that you want to choose for your business. I recommend you to check these Option for registration before proceeding further.

If you want to do business as Sole proprietorship then it doesn’t need any registration with Government but there are some business licences you need to take when setting up Sole proprietor firm/company.

And these business licences depend on the type of business that you want to do. For example it can be a product based or a service based business. These licenses will also help in getting a bank account in the name of your business entity.

Business licenses in India

PAN Card

As a Sole Proprietor firm you will be filing returns in your name so a PAN card is mandatory. you can apply for the same online for  94 which you will get in 7 days. Apply here – https://www.tin-nsdl.com/

TAN [Tax Collection & Deduction Account Number ]

If you are collecting tax either from the customers or your exployees then a TAN is Must and complete procudure to apply TAN is explain in simple terms here – http://www.startupfreak.com/how-to-get-tan-number-in-india/

Service Tax Registration

In any year if your firms total turnover crosses 9 lacs then you will have to pay service tax which is 10% and you can register and pay for the same online. More info – http://www.servicetax.gov.in/st-proc-home.htm and Service Tax registration form here – http://www.servicetax.gov.in/forms/st1.pdf

VAT/ CST Registration

VAT is a State based tax and CST is Central based tax. If you are buying or selling taxable goods within a state, then VAT registration should be obtained. And if you are buying or selling taxable good across different states then you have to obtain CST registration. VAT rules varies according to the sates in which you are doing business. You can register for VAT online. More info – http://ctax.kar.nic.in/what_vat/About%20vat%20nnew.pdf  For karnataka VAT registration can be applied here http://164.100.80.121/cto/Registration.aspx .  VAT registration fees in Karnataka  500

Shops & Establishment License

Under the Karnataka Shops and Commercial Establishments Act,- (1961), within thirty days of the establishment of the new company, the business owner should send a statement to the inspector of the area concerned, and this statement should contain the name of the owner/manager, Postal address, name of the shop/establishment and any other prescribed details.  once the fees and the statement is accepted by the inspector, the Registration Certificate will be given immediately. Shops & Establishment License fees depends on the number of employees that you have, starts from  125 to  12500 for 100 employees

Importer Exporter Code

This is a 10 digit number like PAN number and is issued by Director General of Foreign Trade [DGFT] , Ministry of Commerce, Government of India to Indian Companies and Individuals who want to carry International Trade. More details here – http://dgft.gov.in/ Apply for it online here http://dgftcom.nic.in/ieconline.htm. Importer Exporter Code Fees  250( Approx)

Professional Tax

If you have employees then you have to collect professional tax from them and pay it to government. Some states do not have this tax imposed and some states collect fixed amount say  2500 Annually.  Please check with you respective states and do the needful.

Employee Provident Fund Registration

If you have less than 20 employees then its not mandatory but you can voluntarily take this for the better employee benefits and employee retention. Its mandatory for more than 20 employees firm and other 180 business classes specified under the law. It can be used as a valid company expense and deducted from the total tax. The registartion is done at no Cost at The Employees Provident Fund Organization (EPFO) which is a statutory organization under the Ministry of Labor and Employment. Once the employer is registered with the EPFO, it will register his employees with the office and open Provident Fund accounts in the name of each employee. More information is available at www.epfindia.gov.in. and registration here – http://www.epfindia.gov.in/registration.htm

ESI (Employee State Insurance) Registration

This is used for health insurance purposes for your employees and is  mandatory for employing 10 people in factory and 20 people in other establishments like shops, hotel etc. The Employees’ State Insurance (ESI) Act (1948) provides for a fund administered by the ESI corporation in which contributions is made both by the employer and the employee at the rates prescribed by the National Government. This is done at no cost at the regional offices in the states. More info here – http://www.esic.nic.in.

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96 comments

  1. Bharath Ponnusamy

    Nice and informative article.
    I have two questions.
    1)I am just going to start a service based company and hence my turnover won’t 9 lacs.
    Do I still have to get Service Tax license?
    2)Is it mandatory to get “shop and establishment registration” since I am not buying and selling any goods?

    • Hello Bharath,
      If your turnover doesn’t cross 9 lacs then you just need to pay tax as a normal individual and no service tax registration is need. And its not mandatory for shop and establishment registration unless you need it in bank for creating current account.

  2. Hi, great article!!!! Thanks for much needed info..
    I have a doubt if you could clear. I want to set up a sole proprietary firm which would be a recruitment agency, I do not have much capital to start off and cannot afford a business office initially. I would want to start operating from home as I am doing as a freelancer. Me and my husband are putting up in his company leased accommodation. Can I still register the firm on my name?? I have landline bills etc on my name for this address..

    • Yes surely you can register the firm in your name. Go ahead and all the Best!

      • can i start import business on pan card and bank account ?

        do i have to open proprietorship business ?

        • You have to apply for IEC code…. IEC is required only for companies importing / exporting goods in / out of India. For exporting services outside of India, e.g. providing web design services an IEC is not required.

  3. Dear sir
    i want to open new travel agency in delhi as soul propriter ship.
    mere pass sabhi id hai,lakin meri company ke name se pen card nahi ban pa raha hai
    jis karan main company ka account open bhi nahi karwa sakta.plz koi upaye bataye taki main apni company ka pan card banwa saku.

    Thanks & Regards

  4. Hi, I am an American non-Indian living in Mumbai on an employment visa. I have a pan card and am looking to start up my own business on the side. Is it possible for me to start a sole proprietorship on an employment visa as I do have a Pan card? If not, can I apply for a business visa while I have an employment visa? your help would be greatly appreciated. thank you.

  5. Hi, can you guide me with the legal formalities involved with setting up a small scale franchise shop in Bangalore?

  6. How to get a current bank account with company name, bank need some gov. registration for it,Right?

  7. hello i wanna to sell indian products like saree,salwar suits and tshirts and handicraft products through ecommerce site in india also in outside of india like us,uk,aus,uae,russia etc .. so what are the documents require? i m starting alone so business is sole propritership.plz reply me.

  8. Hello Startupfreak,Plz advise me how to a korean individual registred in service tax Delhi.
    Person provides consultancy services, This time who is doing job in India.Plz provide me detail information in this regard. I am waiting your reply.
    Regard:
    Nitish Kumar.

  9. What are the legal formailities for starting ecommerce coupons/deals/vouchers business. No products.

  10. Hi, I wish to open a sole proprietorship account to administer some grant money below 9 lacs. I have a question – do I need a PAN card in my sole proprietor firm name or can I open such an account in my own name and file a second set of returns?

  11. Hi, I am already running a Pvt Ltd company in Andhra Pradesh. I want to expand the same in Kerala. Kindly guide me the procedure for the same. I already selected the place for the same. My business is dealership.

  12. Hello Vasant sir, I am Amol Tilave from pune. i want to start my own trading business of steel pipes.kindly advise me for documents which are needed to start my own trading firm.also various govt procedures to be followed.

    • To make your business legal. first decide your constitution. Even proprietary Form is also suitable to your needs. but if you think that a corporate structure will help you to get more work than you can choose that also….If someone is your partner than you should form partnership firm and llp….all has its own advantage and disadvantage….let me know your choice so that I can guide you about further procedure..

  13. I feel like I am going around in circles. I want to start a sole proprietorship and need a bank account in its name to apply for VAT and IEC. But the bank wants VAT or IEC to open the account. It’s a catch 22.
    How do I approach the VAT authorities without having a bank account or something else in the name of the proprietorship?

    • VAT is state levy so entire formality depends on in which state you are and what is nature of business?

      Do let me know so that I can guide you in detail

  14. hi i want to start a job placement company as a solo partnership company, i have 2 MNC clients right now, but i don’t have any registration; i have only 2 employees ;so whats the procedure any one can help me my mail id is [email protected]

    • To start a Sole Proprietorship, one does not require any registration with the Government. Carry on the business until you start making significant revenues and then go for appropriate business licences if required

      • Hi Sir, I have also same kind of firm and i want Sole Proprietorship for this Another PAN card is required with my firm name or my PAN card is OK.

        • @disqus_I8aMue6Ov1:disqus There is no different PAN card for Sole Proprietorship. You have to use your own PAN card for all the firms you run as Sole Proprietor.

  15. I am planning to start a sole proprietor software co. what registration and permission i need to take before starting it.

    • To start a Sole Proprietorship, one does not require any registration with the Government. Hence, in order to commence business as a Sole Proprietorship concern, you will require only the following:

      PAN Card of the Sole Proprietor
      Bank Account in the name of your Sole Proprietorship business
      And the licence depending on the kind of business you will have. IE code(if you are eimporting/exporting) Proffesional tax and TAN if hiring employees etc

      • Hi,

        I am an employee of a proprietorship firm (travel company) and
        simultaneously I have started my own proprietary firm of IT software
        services from last one year. My salary is 4 lacks and income from my
        proprietary firm is around 2-3 lacks. In future my firm income may
        increase.

        What are the registrations required for a proprietorship firm? Do I need to register for service tax?

        Thanks and Regards,
        Relicon

  16. am planning to start sole proprietor for real estate consultant in bangalore, what is the process and formalities?

    • Carry on the business until you start making significant revenues and then go for appropriate business licences if required. Right now you just need a PAN and file tax in your name. Sole Proprietorship, one does not require any registration with the Government.

      • if I do not register with government then how can use the name of my firm for communication.

        • Hi Pankaj,

          Did you get any reply for the question. I have the same question, can I use the company name on my website and all agreements to the clients?

  17. Hans Raj Agarwal

    I want to start a admission consultancy as a sole proprietorship firm. now is it mandatory to register this firm with state govt? if yes, how? and how to open a bank account on the name of that firm? please guide me…

    Hans Raj

    • To Start as sole Proprietorship, you don’t need to register with the government. Here is the article explaining how to open current account( which is not mandatory) http//www.startupfreak.com/how-to-open-current-account-sole-propreitor

  18. really an awsm article:) thanks alot

  19. Hi,
    I wish to sell books at stalls and exhibitions. Books is not a taxable item. I am not employing anyone. I am doing it myself and a few friends may volunteer. I will also be helping schools. My turn over will be under 9 lakhs. I will using my house as office and warehouse. My questions are
    1. do i need to register my business
    2. do i need to register as shop/establishment
    3. do i need a seperate account or can i use my own account? Do i need a pan card for the business. I have my own.

    • Hi Adi,

      1.There is no need of any registration with the government as a sole Proprietor
      2.Shop/establishment is not mandatory it is required for creating current account that’s it
      3. You can use your own savings account for the purpose there is no problem.

      4. You will be using your PAN card for your business purpose and file the returns in your name
      All the best!

  20. Deepesh Dhasmana

    Dear Sir,

    I am trying to do my own work, I want to start Stainless Steel
    Modular kitchen work, for this I will purchase sheet from some shop &
    then will take this sheet to some company for cutting of sheets & then
    move it to some other company for bending of these sheet then will
    move it for welding & after that will move this material for powder
    coating to some other company, at all stage I pay VAT at sheet
    purchase time & service tax where I will tke services. Is it required
    to me to register me as a company , shop or I can work in this way &
    also is it the right way to work or not

    • Yeah sure there is no problem in outsourcing the work and inventory as a sole Proprietor. Keep records of all the payments you have done so that you can claim tax benefit while filing income tax.

  21. Thanks brother !!! wonderful compilation

  22. If I have 3 Proprietorship firm registered in my Name and each have earning less than 9 lacs per annum, still will I be entitled to Serice Tax Payment.

    • If you are sole Proprietor then your businesses are not separate from you, that means you are filing returns as an individual. So if your total turn from all the businesses crosses 9 lacs in any year then you must register for Service tax.

  23. Hello Startupfreak,

    I am living on rent in a society. I want to start a graphic and web designing firm as a sole proprietor, and handle my projects from my home.

    My question is

    1. What type of license is required? Do I required a shop act license, or any other license.
    2. Do I need a commercial meter for electricity.
    3. I will outsource some projects to freelancers, so do I have to keep records of all the payments done to freelancer, and what type of record do I have to keep.

    4. Do I required my own Pan Card or company Pan Card to file the returns. And how I have to pay tax as individual or as company. And what are the tax limit for individual and for a company.

    Please guide me…

    • Hay Sagar did you get a reply? because i have a similar situation. kindly let me know( [email protected]) in case if they got back to you on your mail or something. thanks in advance and wish u all the best

      • Didn’t got any reply yet … but i have done some research, and found that if we are living on rent, then first we need to take owners permission letter, then we get a shop act license to start a local business.
        We don’t need any commercial meter for a sole proprietorship business.
        We have to keep track of the payment we done to freelancers.
        We can use our own pan card for income tax, as we are the sole proprietor of the company and we are responsible for each and everything happens to the company.
        And finally we want a bank account of our firm . . . . Dat’s it

        And thank for your Wishes . . .

        • Hi, Thanks for the info. What about the service tax? And what are the documents required to open a company bank account?

  24. i have started a sole proprietorship company for Dairy products..and planning to sell all over india… what are all the papers i should have like, TIN number, CST, C form, TAN, VAT.. etc… please tell me clearly.. currently i have my pan card only..

  25. Hi, how easy is it to change over from a Sole Proprietorship to a Pvt company in the future? I want to work as a sole proprietor right now, but once my company starts growing, I might want to change that. Please advise. Thanks

  26. i am working in a firm and also want to start a sole proprietor firm , is it possible if i continue my job and business simultaneously or any problem in income tax and i also paying Professional Tax from my current employer , please give some advise.

  27. Hi

    Thanks for educating us all. Great work.

    I would like to know that I am currently employed, however I am also doing some free lancing as Consultant; is it OK. I want to start my own work as Sole Proprietorship but also want to continue working till the time I do not make enough money compensating my salary. As I understand, I have to get a website and open a current account using my PAN card. My queries here are:

    1. Can I provide my home address on website- I am staying in a residential society.

    2. The total income for registering for tax you mention should be above 9L- does this include my salary + the income form my freelancing work?
    3. Is it OK if I only get a website and use my saving account and continue working; as my freelancing work is completely assignment based and does not have any fixed earnings?

    Wishes
    Neha

  28. Hi,

    i have started ladies boutique in market place recently with 5 employes, pls suggest all requirements to cover TAX related issues.
    Thanks

  29. I am planning to start a Real Estate Co. So exactly I want to know the process which registration and permission I’ll have to take.

  30. Karthik Shivashankar

    With all that i read here- I can start a sole proprietorship business without any registration or formalities until my business reaches an annual turn over of Rs. 9 L. I am starting a business to web-design and I have a couple of questions

    1. Without any registration, how can i give a bill or receipt to my clients. Could you share the format for a receipt? Is there any format for generating invoice?
    2. I now understand the concept of Service Tax, but could you elaborate on VAT. Would VAT be applicable in my scenario & do I need to register for VAT. I am based out of Bangalore.

    • Akshay Ramachandran

      I need advice on the invoice issue as well. Startupfreak, please address this query?

  31. Really nice article, keep it up the good work!

    I want to clarify one thing. I already run a Sole Prop. Company and have PAN + Bank AC. Now I want to start another Company but this time I don’t want to apply for new Bank AC.

    Is there a way such that my new company acts as a subsidiary or sister concern of Old Company and I’ll be able to receive/send payment with my Old Company bank AC.

    Please guide!

  32. Hi
    I am starting an business of Data Entry and intend to start a Spoken English Institute and later start a BPO in Villages and small towns. It would be very helpful and I would be very grateful if you could tell me what are the necessary things to do for me to legally perfect and without any problems in tax or any other thing

  33. Hello,
    I am planning to start a sole-proprietorship wherein I will be purchasing taxable goods within Mumbai and exporting the same out of india. My initial purchase of taxable goods will be over 5 Lacs and the same will be exported out of India. I understand that i will be eligible for VAT refund. Hence, please inform 1. if i should apply for VAT registration before making the purchase of taxable goods or after? 2. how long does it take to obtain VAT TIN number once applied for same online? Awaiting your prompt reply!

  34. i want to open a sole proprietor firm in electrical and hardware trading in delhi. please let me know in starting any registration is required and also let me know that how much turnover is required for VAT and TAN No or TIN No.

  35. I want to open sole proprietor firm in electrical and hardware trading. Please let me know, in starting any registration is required. Please also let me know, after how much turn over we require the vat and tin or tan no.

  36. Hi Sir, I am an electrical engineer. doing in mnc as a manager. Iwould like to start own business like service company. Means Taking the Electrical annual maintenance contract in restaurants & Offices. If they will ask me any tax number?. or what is the procedure to start.pls guide me

  37. i am planning to start an sole proprietor advertising firm.
    i am not liable for service tax registration but not clear for vat registration and i want to open a bank account and they are asking for business license, so what i need to submit

  38. SILICON Technologies

    Dear sir,

    I have just starting a service center as proprietorship. I have a shop and is taking license from Panchayath. We have lies agreement also. For taking a bank account for shop address, what are the documents required. Monthly 15000 business only, so savings account is possible or current account required. payment may come as cheque in shop name .

    pls reply

  39. Very good insight. Where do you normally get the license for software services?

  40. Hello ,

    I’m in progress of registering a firm as a sole proprietor, then based on that i’m planning to apply for IE Code.
    Just to name the firm I just want to check whether the choose name is already been register with DGFT. Is there any way to check it ?

    Thanks,
    Arun

  41. Hi,
    Great website and very informative articles. Thanks for the invaluable guidance.
    I want to start an online business of artificial jewelry. I will procure raw materials from another state, make the jewellery at home and sell them online. What are the licenses I will require? How will I pay the taxes for my profits? What is the limit of income for paying taxes?
    Thanks in advance

  42. HI this is Abhilash Pawar from Bangalore , I m planning to start my own educational consultancy under sole proprietor and i know that for this there is no registration required from the government , but i need the information regarding the other details as well . My operations are within Karnataka state . Guide me regarding the licence for education consultancy .

  43. Hello there,

    I jumped the gun long back.

    I have a sole proprietorship firm registration registered under Service Tax.

    Earlier my turn over was less than 10lakhs but now it’s more than 10 lakhs,

    But I don’t work for Indian companies. I only work for UK company. So, I don’t charge them Service Tax.

    So, do I still need registration under Service Tax? If not then can I change sole proprietorship to a regular firm registration?

    What is the regular firm registration and how to do that?

    Please advise.

  44. Sire Greate Useful Info Great work Thanks To All

  45. Hi,
    Thanks for well documented post.

    I need little help:
    1) Nature of my business: I am planning to start e-commerce website, where i will be selling imported products. also like to start as sole proprietor.

    My Query:
    – TAN >> For imported products can we take taxes from buyer? should i apply for this?
    – Service tax registration. >> at the moment we are planning to start small. Can i register for this in a later stage(may be after 3-4 month). just want to make sure that the business is going good and then apply for this instead of registering now itself?
    – VAT/CST >> For imported products can we take VAT from the buyer? should i apply for this?
    – Shops & Establishment License. >> since it is online business , do we need to apply for this? Also can we register it from our rented home address?
    – Do I need to take any other licence?

    Thanks again for your help.

  46. Hello,

    Thanks for the information,

    Could you please suggest me on this
    I am planning to set up a online business of arts,as i am located out of India and because of this i am planning to go for general partnership/sole with my mother name in India.
    what is the right approach and procedure..as it is a small scale business but is there any effect if the transaction is done overseas…

    what will be the legal documentation and taxation.

  47. Hi. I am planning to start a wholesale mobile dealership in Bangalore. It is a Sole propreitership.

    Can you please tell me what are all the necessary registrations required in this regards? and also please note i do not have any employees.

    Thank you

  48. Hi,

    I
    am an employee of a proprietorship firm (travel company) and
    simultaneously I have started my own proprietary firm of IT software
    services from last one year. My salary is 4 lacks and income from my
    proprietary firm is around 2-3 lacks. In future my firm income may
    increase.

    Can you help me out with the registrations required for a proprietorship
    firm?

    Thanks and Regards,
    Relicon

  49. Guys, need little help with TAN application for my startup. Under what category should I apply? These are the options which popup’