In the age of the internet, starting an eCommerce business is a great way to make money. However, it is a common belief that starting an eCommerce business needs a lot of compliance and legal formalities. Therefore, persons operating as sole proprietors often feel reluctant in doing business as eCommerce traders. But, there is no need to hesitate as it is easy to start an online business, even as a sole proprietor. All you need to do is register sole proprietorship business that you own and get started.
What is a Sole Proprietorship Firm?
A Sole Proprietorship firm is a business owned by a single person. This is the simplest and cheapest business to form with minimum legal requirements and compliance. You can set up a Sole Proprietorship firm by obtaining a license as per the nature of the business.
Cheers to its simplicity, most businesses start with sole proprietorship firm. In India, there are more sole proprietorship firms than any other form of organization.
Things to Note
- From a legal and tax point of view, there is no distinction between the firm and the owner. Owner’s PAN card is the firm’s PAN card.
- Any profit made by the firm is personal profit of the owner. Any loss incurred by the firm is to be made good by the owner only. It may be through his capital or personal assets. Therefore, the owner enjoys all the profits and bears all the losses.
- A Sole Proprietorship pays no corporate income taxes. All profits of the business are taxable as individual income.
- There is no formal registration for Sole Proprietorship firm in India. You just need to open a current account in any bank in the name of the business. However, to apply for the current account you are need to submit a license/registration issued by the authorities.
How to Register Sole Proprietorship for eCommerce Business?
You need the following registrations to start your own eCommerce business or to become a registered seller on other eCommerce websites like Flipkart, Amazon, Jabong, Myntra, Shopclues etc.
Here you will find the type of registration as well as the documents needed for each type of registration. A tentative timeline will also give you a fair idea of average time it takes to register your business under various acts.
Shops & Establishment Registration
Shop Act Registration Certificate is a kind of permit issued by the state government. The Department of Labour of each state is responsible for making all registration certificates.
It is also known as Gumasta License in Mumbai.
This registration applies to the eCommerce businesses which:
- Operate from a shop,
- Uses godowns or warehouses for the inventory, etc.
Documents for Shops & Establishment Registration
You need self-attested xerox copies of the following documents.
- Proprietor’s photo, aadhar card and PAN card
- In case of own premises- Registry Papers or latest house tax receipt
- In case of Rental Premises- Rental agreement of the premises and No Objection Certificate
- Latest Utility bill, e.g. electricity or water bill
- Photograph of the premises entrance with board of the firm
Within 7 working days, you will receive Shops Act certificate
Register Sole Proprietorship under GST
The Central Board of Excise and Customs (India’s Tax Authority) has introduced a new Goods and Services Tax (GST) system. Under the new regulations, eCommerce operators and Sellers on e-commerce platforms need to register for GST and have a GST registration number starting from July 1st, 2017.
The 15-digit GST registration number provides a unique identifier for the collection and payment of GST to India’s Tax Authority.
GST or Goods and Service Tax is a comprehensive tax that has replaced all the indirect taxes (VAT, Service Tax etc.) imposed by the state and central government. The GST is levied on manufacture, sale and use of the goods and services.
Registration with GSTIN is necessary for doing business in the GST regime as businesses will have to upload monthly supply data as well as file returns.
Documents for GST Registration
- Name of the Proprietorship Firm
- Proof of Business Premises – Rent Agreement / Allotment / Possession Letter / Registry papers along with Electricity bill of Landlord/owner/ Copy of the Building Tax Receipt if the business is running on owned premises.
- PAN and Aadhar Card of Proprietor
- Email ID and Mobile number of Proprietor
- Nature of Business
- Photograph of Proprietor
- Canceled Cheque/Bank Statement of Saving Account of Proprietor
You will get GST registration within 5 working days subject to approval from authorities.
It is evident that doing an eCommerce business as a sole proprietor is not a tough job. To register sole proprietorship for eCommerce business, you only need to follow the simple tips above.
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