What Is Proprietorship?
A simple definition of what is proprietorship is that it is “the managing or management of a company or other entity”. Another simple definition is that it “is the legal relationship between an agent and an entity”. Yet another simple definition is that it “is the relationship between an individual and an authority”. In more technical terms, it is “a joint ownership institution in which one or more individuals own shares in a business”. But what is also commonly understood to be proprietorship is “the right to manage and control the property and affairs of another”.
Let us have a more in depth look into what is proprietorship in India. There are many business ideas which can be made successful only when one partner is also willing to be the sole owner of the same. There are many aspects of any business which requires a sole proprietor or only one owner. These include finance, finances, marketing, advertising, research and development, administration, maintenance, ownership of land and buildings, partnership and joint venture, acquisitions, divestiture, selling and trading, investment, partnership and joint venture profits. With such a huge list of tasks to be performed and so much responsibility on the shoulders of the owners, hardly any entrepreneur can do it alone.
Most often than not, when there are separate legal entities involved in the same business, there are formalities and compliances involved. There are formalities in the formation of the partnership, and of the partnership itself. In the case of the sole proprietorships firm registration in India is required. There are many types of business and many of these depend upon the nature of the venture. And even if the same business is conducted under different names, the principal business or profession must be dealt with under one general banner or name.
Another important aspect is that of establishing a trust. This involves the transfer of all the business assets to one trustee who will then become the sole beneficiary of the trust. He is responsible for the management of the assets during his absence and is paid a specific percentage of the profits. The trustee must keep the books and ensure compliance with the rules. Otherwise the entire property may be frozen and no recovery can be done.
Another type of firm is that of a proprietary business. Under this scheme the proprietor is treated as the sole proprietor. He can do what he likes with the company till he sells it off. But then the proprietor will have to pay all taxes on his income till he becomes the sole owner again. It has to be clearly understood that the sole proprietor cannot change the same to a joint owner during the period of his service.
The profit sharing that is done under the proprietorship system is one of the best ways of ensuring that the cost incurred by the firm is kept at a minimum. The profit sharing also ensures that the costs are reduced to a great extent. That is why the sole proprietor should ensure that the costs are borne equally by the profits. There is a wide range of cost that can be borne by the proprietors. It depends on the profit levels and the production scale.
There are several other expenses that can be shared equally by the firm and also included in the cost of what is proprietorship. These include the rent, the operating cost including the telephone bills, office furniture, office stationery and other necessary expenses. Most of the cost which is borne by the firm is called the profit plus cess. This is the excess amount that is retained by the firm after taking into account the profit made by the business. In the case of the sole proprietor tax returns are submitted but the profit plus cess is not included in them.
The above described are the simple but very important things about what is proprietorship in India. These enable you to understand the intricacies of what is proprietorship in India. There are various other business ideas available in India and if you wish to start a new venture you can easily choose these. Just make sure that you select the correct idea and then proceed with the rest of the basics.