March 27th, 2010 — Income Tax, Investment in India
To open a Current account in the name of sole proprietary firm, RBI has issued certain guideline regarding KYC for such account.
Know your Customer (KYC) guidelines – accounts of proprietary concerns
A reference is invited to Para 2.4(a) of the Master Circular on KYC/AML/CFT/Obligation of banks under Prevention of Money laundering Act (PMLA), 2002 issued to banks vide DBOD.AML.BC.No.2/14.01.001/2009-10 dated July 1, 2009. It has been advised to banks that internal guidelines for customer identification procedure of legal entities may be framed by them based on their experience of dealing with such entities, normal bankers’ prudence and the legal requirements as per established practices. If the bank decides to accept such accounts in terms of the Customer Acceptance Policy, the bank should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are
2. For sake of clarity, in case of accounts of proprietorship concerns, it has been decided to lay down criteria for the customer identification procedure for account opening by proprietary concerns. Accordingly, apart from following the extant guidelines on customer identification procedure as applicable to the proprietor, banks / financial institutions should call for and verify the following documents before opening of accounts in the name of a proprietary concern:
- Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern),
- Certificate/licence issued by the Municipal authorities under Shop & Establishment Act,
- Sales and income tax returns,
- CST/VAT certificate,
- Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities,
- Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, etc.
The complete Income Tax return (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected duly authenticated/ acknowledged by the Income Tax Authorities.
Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern.
ii) Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.
4. These guidelines will apply to all new customers, while in case of accounts of existing customers, the above formalities should be completed in a time bound manner and should be completed before December 31, 2010.
September 10th, 2008 — Income Tax, Investment in India, Service Tax, Uncategorized, VAT
There is no formal registration is required for a sole proprietorship. You simply have to open a bank account with the name & style you want to work. But if you are liable for state VAT or service tax registration, then you have to obtain VAT and/or service tax registration. Further, for sole proprietorship, no separate income tax PAN is required. The PAN of the proprietor will be the PAN of the firm and proprietor will have to file income tax return in his personal name.
Now after announcement of KYC norms by RBI, it is mandatory to have at least two registration in the name of sole proprietorship firm. So now you have to submit two documentary proof for the name of sole proprietorship firm. Normally owner can get registration under shop & establishment act and under service tax or VAT.
Visit our new website: www.mukeshraj.com
May 8th, 2008 — Investment in India
The sole proprietorship is the oldest, simplest, and most common form of business entity. It is a business owned by a single individual. For tax and legal liability purpose, the owner and the business are one and the same. The proprietorship is not taxed as separate entity. Note that the earnings of the business are taxed at the individual level, whether or not they are actually in cash. There is no vehicle for sheltering income. For liability purposes, the individual and the business are also one and the same. Thus, legal claimants can pursue the personal property of the proprietor and not simply the assets used in the business.
Advantages of a Sole Proprietorship
Perhaps the greatest advantage of this form of business is its simplicity and low cost. You are not required to register with the government, nor are any legal charter required. The sole proprietorship form of business has other advantages:
- The owner or proprietor is in complete control of business decisions.
- The income generated through operations can be directed into the proprietor’s pocket or reinvested as he or she sees fit.
- Profits flow directly to the proprietor’s personal tax return; they are not subject to a second level of taxation. In others words, profits from the business will not be taxed at the business level.
- The business can be dissolved as easily and informally as it was begun.
These advantages account for the widespread adoption of the sole proprietorship in the India. Any person who wants to set up shop and begin dealing with customers can get right to it, in most cases without the intervention of government bureaucrats or lawyers.
Disadvantages of the Sole Proprietorship
This legal form of organization, however, has disadvantages:
- The amount of capital available to the business is limited to the owner’s personal funds and whatever funds can be borrowed. This disadvantages limits the potential size of the business, no matter how attractive or popular its product or service
- Sole proprietors have unlimited liability for all debts and legal judgements incurred in the course of business. Thus, a product liability lawsuit by a customer will not be made against the business but rather against the owner.
- The business may not be able to attract high-calibre employees whose goals include a share of business ownership. Sharing the benefits of ownership, other than simple profit-sharing, would require a change in the legal form of the business.
- Some employee benefits, such as owner’s life, disability, and medical insurance premiums, may not be deductible, or may be only partially
deductible from taxable income.
- The entity has a limited life; it exists only as long as the owner is alive. Upon the owner’s death, the assets of the business go to his or her estate.
Visit our website: http://www.mukeshraj.com/contact.html