Complete guide to register an e-commerce business in India: Sole Proprietorship
Registering a eCommerce business extremely crucial. if, you are looking to accept online payments and to be able to integrate an authorised payment gateway on your online store.
This post is a one- stop guide for all your queries about getting your brand registered and working to start selling online. And the easiest way to do, is to register an e-commerce business in India as a Sole Proprietorship firm.
Let us start with understanding what is a sole proprietorship firm ?
For startups, sole proprietorship is the easiest way to form a firm to start, has lower legal compliances and is very easy to tackle. A proprietorship business and its proprietor (i.e. you) are a single entity in all legal matters. Indian law doesn’t treat the two differently as is the case with a company registered as a Private Ltd or a Public Ltd or even a Partnership firm. That means, you are taxed at individual rates instead of the corporate rates. So it fairly reduces your tax formalities as you have to file only one personal income tax return.
So, now you understand that you and your brand are one soul. You can even run it from your home, for which no special registration is required. But a note for whenever you intend on expanding and setting up a physical commercial store, you will have to fill in some formalities with your local municipal corporation office and will need to check the Shops and Establishment Act.
Now its time to dive straight to the details of how to register, the cost of setting up your online brand, taxation of a sole proprietorship and business licenses required.
Registration of Sole Proprietorship
You can register your ecommerce business under sole proprietorship at your nearest local municipal corporation office. You need to submit the Shops and Establishment Form to complete your registration. Along with it, you are needed to submit an undertaking. The fees for registration may vary depending on the state and the city’s municipal corporation area.
Note: While registering, you will be needed to submit an address proof for the Shops and Establishment registration. You may submit an address proof for your home or any other place.
Cost to set up a Sole Proprietorship firm.
Setting-up a sole properietorship firm does not requires huge investment. All you need is a current account in the name of your business, at a bank of your choice. That is it! All you need to do is, at the local bank branch of your choice, ask for a form for proprietorship firms and get a bank account ready for all business related transactions.
When opening an account you also need to submit an address proof such as an telephone or electricity bill or a rent agreement if you’re going to use a rented space.
In sole properitorsship form you don’t need a separate PAN No. Your personal PAN will serve the purpose. And when filing Income Tax returns, you will have to file returns in your personal name only.
Also, you don’t need to pay corporate tax rates. As mentioned earlier, individual tax rates apply as all profits, losses, assets and liabilities are the property of the proprietor. And the proprietor pays self employment taxes on any profits made, making it all the simpler.
Service tax is applicable only if you’re selling a service to your customers. And similarly if you are selling goods, VAT, Excise and/or Sales Tax are applicable. But all these taxes come into pay once you’ve crossed an annual turnover of 10 lacs. You may also need to consider Professional Tax, if you’re employing peoples.
Depending on the nature of the business, you may need different registrations and licenses.
Shops and Establishments License: This registration is needed if, you want to set up a physical shop and plan to employ people. And it is very essential for getting your own payment gateway for your online store.
CST/ VAT Number: If you are looking to sell products on your online store, then VAT or CST (between states) may be needed once your annual turnover crosses 5 lacs.
Service tax registration: This registration is mandatory and may be required once your annual sales turnover crosses 10 lacs.
Professional Tax: This tax is mandatory if you even have single employee. Each state is allowed to create its own guidelines, so it would be advisable to check whether it is mandatory to register for professional tax in your state or not.
All these registrations and licenses may vary from state to state, so please do check your state’s guidelines and regulations (exemptions, if any) to know better.