Sole proprietorship is the best option if you are planning to start a new small business. A sole proprietorship is an unincorporated business owned by one person. The owner of a sole proprietorship is known as a sole proprietor. You can start it the day you want it. When your business grows you can then turn it into an LLP or a Company.
As a sole proprietor, you can operate the business under your own name or under a trade/firm name or your website's name. e.g. Let's say you are an IT consultant, you can operate the business under your own name "Sumedh, IT Consultant" or under a trade/firm name "ABC IT Consultants".
How to open a current bank account for my proprietorship
If you want to open a current bank account under your trade name "HKSM Consultants" you will need couple of things
- Service Tax Registration or Sales Tax or VAT registration or Shop Establishment license. For consultancy you need just service tax regd but for selling goods you will have to go for sales/vat/ regd and shop license
- Letter from your CA regarding the nature of your business.
- Letterhead with the firm's name and address.
- Stamp in the name of the Proprietorship.
- Address and ID Proof of the proprietor. If proprietorship address is different then you will also need office premise address proof.
You can register your proprietorship for Service tax with the ACES website by filling the ST1 form.
Note - Make sure you enter the trade name in "Name of the Applicant" Section.
Submit the ST1 form online and take a printout of ST1. Submit the ST1 printout along with proof of ID, address documents to the Service tax office where your business is located. Couple of days later you will get the ST2 form in your email. Take a printout of ST2 and go to the service tax office to get it stamped. You may have to pay a small bribe to get the stamp. Long live India :)
Once your ST2 is stamped take a copy of it and submit it along with the rest of documents mentioned above to your bank. Enter the name of your firm in the first name section on the current account opening form of the bank.
Note - You will have to file a Nil return if your annual turnover from the proprietorship is less than 10 Lakhs. If your turnover is more than 10 Lakhs per annum you will have to pay service tax. Talk to your CA for more details on this.
If you have any questions ask them in the comments section below.
Note - I am not an expert on service tax registration, I am just an ordinary guy just like you who had lots of questions while starting my own proprietorship which is why I wrote this small article to help others.
Since lot of the readers want to setup their own e-commerce websites to accept online payments, I have written a new article which talks about all the registration steps and documentation needed for opening your own merchant account with Indian payment gateway providers.