How to start a proprietorship business: step by step

What a proprietorship is

A business owned and run by one person. It has no separate legal identity: the business uses the owner's PAN, and the owner is personally liable for its debts. There is no single "proprietorship registration". You prove the business exists through other registrations.

Steps

1. Choose a business name. Check it doesn't copy an existing brand or registered trademark.
2. Keep your PAN and Aadhaar ready, and link them. The business uses your personal PAN.
3. Get at least two business proofs, which banks ask for to open a current account. Common ones:

• Udyam registration (free, online, Aadhaar-based)
• GST registration (compulsory if you cross the limit, optional otherwise)
• Shop and Establishment registration from the state labour department
• Trade licence from the municipal body

1. Open a current account in the business name. Keep all business receipts and payments here, separate from personal money.
2. Get activity-specific licences, such as FSSAI for food, IEC for import or export, or a drug licence.
3. Set up your books. Record opening capital, issue numbered invoices and keep bills for every expense.
4. Register as an employer when you hire: Professional Tax where the state levies it; ESI at 10 employees; EPF at 20.

Your first-year compliances

Tips

• Presumptive taxation (old 44AD/44ADA) can keep record-keeping simple for small businesses.
• Pay yourself through drawings. A proprietor's own salary is not a deductible expense.
• If the business grows or risk rises, convert to an LLP or company later.

Related

• Proprietorship, partnership, LLP or Pvt Ltd: which should you choose?
• Do I need GST registration?
• Udyam registration
• Starting the books: opening entry, capital and drawings
• Presumptive taxation