Avoiding Legal Risks In Sole Proprietorship Registration


Choosing to begin as a sole trader is usually the easiest and most attractive for people to consider. Sole Proprietorship Registration is quite easy and less document intensive when compared to other structures for doing business. Of course, even this very simple-sounding process is not without its legal implications. It means that if you see all possible troubles in advance and take the correct approach, your business will operate according to the existing legal provisions.

Meaning of Sole Proprietorship in Simple Words: 

A sole trader is a type of business entity where one is personally and solely responsible for the business. Although it’s not as formal as the formation of the Private Limited Company yet Sole Proprietorship Registration is significant to start your business legally and to secure it against any future complications.

Process for Creating a Sole Proprietorship Business: 

To register a company as a sole proprietor, you must follow certain steps:

Choose a Business Name: Business names are the branding aspect of your business and may be the first thing people learn about your business. Make sure that none of the letters resembles an existing trademark in the market. 

Get a PAN Card: Tax is required to have a PAN or Permanent Account Number. It’s impossible to register a company or even open a business bank account without it.

Open a Bank Account: Once one has a PAN card, form a current account in the business capacity as a business name. This is important in the segregation of own funds from operating funds to avoid mixing up of the two.

Obtain the Necessary Licences: Depending on your type of business, you may require certain licenses. For instance, when performing a food business, it is compulsory to obtain FSSAI (Food Safety and Standards Authority of India).

GST Registration: You need to get registered with GST if your turnover from the previous financial year, exclusive of taxes, crosses ₹20 lakh. It is especially important not to delay the registration process so that compliance can run effectively and free of penalties.

Legal Hazards of Sole Proprietorship Registration:

As much as registering for Sole Proprietorship Registration is very easy than registering other companies, it comes with its own disadvantages. Below are some common legal challenges and how to mitigate them:

1. Non-Compliance with Tax Laws

In my experience, numerous sole proprietorships fail to appreciate compliance with tax legislation. Having sustainable and correct income tax returns is very important.

Solution: Practise a correct mode of financial recording systems and always seek the assistance of a tax consultant on issues to do with taxation.

2. Trademark Infringement

It has repercussions when one uses a business name or logo with a copyright resemblance to the trademark of another business.

Solution: Carry out a search on trademark before coming up with a business name.

3. Liability Issues

Since a sole trader firm doesn’t create a legal entity for business, then the trader exposes him/herself to holding business debts.

Solution: Buy an insurance policy to cover personal exposure to losses.


Pros of Suitable Sole Proprietorship Registration:

Taking the time to register your company properly can offer numerous advantages:

Legal Recognition: Being a registered company, it enjoys recognition from the government and makes your business more credible.

Ease of Business Operations: A Sole Proprietorship Company Registration helps in easy negotiations with suppliers, customers, and bankers.

Access to Government Schemes: Numerous governmental schemes and subsidies are available to registered businesses.

Tax Benefits: Through Company registration, you are able to offset expenses that you incurred in doing business against your taxes.

Conclusion:

Sole Proprietorship Registration is not complex, but ignoring legal requirements exposes the business to great dangers. However, bear in mind that is not just a formality — it is a strategic investment in gaining the confidence of clients, suppliers, and banks. However, if you are proactive enough and seek help from the best industry professionals like LegalRaasta for company registration, you are investing in the right platform for your business.

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