Business Entities

Sole Proprietorship

A sole proprietorship firm is a form of an entity where a single individual owns, manages, and controls the business. There is no requirement for registration of the firm. The firm has no legal existence separate from its owner. However, the sole proprietor may be required to obtain a license for carrying out business from the local administration. The required capital is supplied wholly by the owner himself, who solely enjoys the profits of the business and bears all the losses. The liability of the proprietor is unlimited, i.e., it extends beyond the capital invested in the firm. This form of organization is suitable for businesses that involve moderate risk1.

A Non-Resident Indian (NRI) or Person of Indian Origin (PIO) may invest in a sole proprietorship concern (except those engaged in agricultural/ plantation activities or real estate businesses or print media) with repatriation benefits only with the prior approval of the Reserve Bank of India (RBI). No person resident outside India, other than NRIs/PIOs, can make any investment by way of contribution to the capital of a proprietorship concern. However, the RBI may, on an application made to it, make an exception for a person resident outside India subject to terms and conditions as may be considered necessary2.

  • 1.Sole Proprietorship, Types of Businesses, Start Up India, https://bit.ly/2ZR7meR, accessed on 18 September 2020
  • 2.Foreign Investments in India – Investment in Proprietorship Concern/ Partnership Firm A.P. (DIR Series) Circular No.39 (December 3, 2003), https://rbidocs.rbi.org.in/rdocs/notification/PDFs/40493.pdf, accessed on 15 September 2020
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Rajiv Rajendran
Executive Director
Corporate Services

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