A sole proprietorship is an entity which is wholly owned, managed and controlled by a single person known as proprietor, who receives all profit and has unlimited liability. In the eyes of law there is no distinction between the sole proprietor and the business owned by him/her and therefore the proprietor is the only owner of each and every asset the sole proprietorship business has and accordingly he/she is responsible for all the debts of the business.
1. Quick and easy to start: One advantage of sole proprietor is the simplicity and easy start of the business. A Sole Proprietor does not need any entity registration with any authority like ordinary company / LLP has to get from Registrar of Companies.
2. Name restrictions: There are no naming guidelines and restrictions applicable to the business except the business name should not infringe the trademark or copy rights of others. So one can start a company with any name and be an owner of the same. However it should not resemble to any words which enjoy state / central government enjoyment/ privilege.
3. Lower Start up cost: Limited capital is the major advantage for setting up and operating a sole proprietorship.
4. Taxation: The tax returns can be filed for the owner and may not be required for the business. If you are owner of more than 1 business(es), all incomes may be clubbed to arrive as single figure and then taxes are calculated.
5. Least government rules and regulations: Sole proprietorships also have the least government rules and regulations affecting it. Sole proprietorships need to take care of sector legislation in which they are working and also need to comply with the specific requirements of the respective state laws.
6. Minimum Alternate Taxes(MAT): There is no liability of Sole Proprietorship towards MAT.
7. Statutory Audit: As they are not covered under the Companies Act, 2013 therefore there is no statutory requirement of audit of books of accounts of sole proprietorship.
8. Tax Audit: Tax audit may be required for Sole Proprietorship if the turnover exceeds the prescribed limit.
9. Control & Authority: All the controls, rights, authorities, responsibilities, risks etc. lies with the owner. Sole Proprietor is in absolute control of business. A proprietorship business cannot have 2 owners and hence the owner enjoys 100% and absolute control and authority on the business.
10. Easy to administer and manage: Sole Proprietor is the owner of the business. He manages the business in the way he wants. All the major and minor decisions are taken by him only.
11. Books of Accounts: Business carried out by sole proprietorship is not regulated by any statute, therefore there are no prescribed books of accounts which are required to be maintained by the business. However at the same time, every proprietor is advised to keep records which may be essential, keeping in mind the business and volume, to satisfy the tax department.
12. Method of Accounting: Sole Proprietorship shall maintain books of Account on accrual basis and the Double Entry System of Accounting. There is no requirement to follow any accounting standards for maintaining books of Accounts.
13. Life Span: It is very easy to close. Sole Proprietorship does not require any approval from any authorities to close the business. The business also closes with the death of the owner and cannot be continued further