Starting a Sole Proprietorship: What You Need to Know About Registration, Taxes, and More

I am a B.Tech graduate currently working as a Business Development Manager. But, as per my interest in setting up my own venture, I want to establish a company as a sole proprietorship. I have a few queries:

1) Do I need to have registration before starting, or can I start operating before registration and register later?
2) As I am receiving a salary as well, how will taxes be applicable for both my salary and income from the business? Would I be required to file taxes once a year or at some other interval? Also, would I need to keep financial statements for the company?
3) Can a sole proprietorship company be converted to a Pvt Ltd company, and if yes, will the process be lengthy and costly? Or will it be the same as the registration process for a Pvt. Ltd. company at the start? Can we keep the name of the company the same after conversion?
4) I would certainly be entering the manufacturing business as well. Please advise if I can start a manufacturing business under a proprietorship, or would I need to register as a Pvt. Ltd. company.

Thank you.

Dear Mr. Ambuj,

In my opinion, you should start your venture in an organized form as a private limited company. If you wish to go into manufacturing as well, it would be easier to obtain registrations in the name of the company, and you would not need to change your business structure as the scale of operations increases. The income tax return needs to be filed once a year, but the payment of taxes will depend on your income. In addition to income tax, the business would also be subject to other taxes such as excise and service tax, depending on the nature of the business.

We are a corporate advisory firm and can assist you in establishing the company and obtaining the necessary registrations if you decide to use professional services. Please feel free to contact us.

Thank you.

Thank you so much, Avika. I need some more clarification. As of now, I am receiving a salary. If I wish to start my business in parallel to my job, is it possible? If yes, how should I go about filing the income tax? Will it be once a year or at some regular interval? Also, would I be required to keep financial statements for the company?

You can start your own business parallel to your job. Please check if your terms of employment prohibit such an arrangement; you would need to start the business in an alternate setup.

Further, your return of income would be filed separately, and the return of income of the business/company would be filed separately. You would need to maintain a separate set of financial statements for the business. In case it is in the form of sole proprietorship, only one return of income shall be filed.

The return on income is filed once a year for all types of assesses, as per the income tax law in force as of the current date.

We can help you with all of this and more. Please feel free to contact us.