Faqs for sole propretership

Pvt ltd 949 views 2 replies

Kumar

Founder

63 Points Joined May 2012

Hi Everyone,

I am an entrepreneur running a Sole Propretership Firm and I have tried a lot to find answers of some basic question which every proprietor will have.

I really appreciate your help in advance & hope that I will get the answers here and I am sure that your answers will help many other proprietor.

I have around 10 employees and turnover of around 10 Lacs a year. I am expecting that it will go double or triple by this year end and will hire 5-8 more employees. Most of our clients are from outside India and we are in software industry. I hope this will give you a good idea and will help to answer my questions.

Question are following:

# Do I need to do any kind of registration to run this IT Firm ?, as per my research thr is no need for any registration

# If registration is not required than can I issue appointment letter & salary slips to my employees?

# If registration is not required how my Firm's name is legal? or how can I make it legal? or I can use any name on my invoice without any legal registration?

# Is it necessary for solo proprietors to file service tax?

# Some employees does not have bank account, hence I need to give them cash and record it in our official letter head with my employee’s signature, is it valid for ITR? If not than what is the correct method for it?

# When I file my ITR (Income Tax Return), will I use my name or my firm name?

# How/Can I show my employee's salary as expense in my ITR?

# How I can create/manage accounts for my firm, do I need consult any CA for this?

# Do I need to audit my accounts from a CA & how much it will be going to cost?

# What are methods by which solo proprietor can save income tax?

# What is the threshold of solo proprietorship firm? when I need to switch from solo proprietorship firm to Pvt. Ltd. company? is it depends on number of employee or depends on turnover?

I would also like to consider some CA/Advisor for my accounts auditing, maintenance, ITR Filing and advising on such issue/topics.

Thank you very much..

Replies (2)

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

You need not take any kind of registration. however you will be required to to apply for PAN for the purpose of filing your I-T returns etc... & also get registered under the Shop Act.

Yes you can prepare Letter Heads of your business by whosing the ofice address, tel no, email etc.. & issue appt letters.

Yes you can use any name for your firm.

Unless the services provided by you cross the 15lacs limit in the F.Y. you need not apply for ST number.

Request your employees to open one bank acount so that they can deposit their salary cheques & it would be a foolproof for the payments. In the alternative for some of the employees who are unable to open the bank account, you can issue them bearer cheques & instruct the bank accordingly

In case of a sole proprietary there is no difference between the proprietor & his firm name. It is just a way of showing the firms name. So you cna put your firms name

You can open an current account with the bank near to your office. Ask the bank if you have any difficulty. No need to consult

If you are doing any professional business then you need not get your accounts audited if the professional receipts do not cross the limit of 15lacs during the F.Y. Also if you are liable to tax audit, then from the subsequent year onwards you will need to take out a Tax Deduction account number(TAN) and deduct tax at source for any payments related to rents, professional fees, commission etc.. if they cross the prescribed imits as specified under the I-T Act

a sole proprietor can show the various expenses incurred for carrying on the profession as deduction from the Receipts earned during the year. these expenses are Telehpone, electricity, salary,printing stationery, depreciation etc.. While calculating the total taxable income the assesse gets a deduction u/s 80C upto maximum Rs 1lacs. the details fo the section are as per the link given below

https://law.incometaxindia.gov.in/DIT/File_opener.aspx?page=ITAC&schT=&csId=5cc98992-765c-46b0-a433-271b2e2b6901&rdb=sec&yr=a56ea192-3ca8-433a-a515-ed68a062eac7&sec=80&sch=&title=Taxmann

There is no threshold for concerting the sole proprietary into a pvt ltd. the purpose to get converted is to get more benefits that are available under the companies Act, expansion of business activities etc..