Closing of Proprietorship Firm

There may be several reasons for the Closing of Proprietorship Firm. In India, more than 60% of Proprietorship firm not succeeded business due to adverse market situations. Our dedicated team will help you with all the documentation. We extend our support from documentation to preparation and filing.

How to Close Sole Proprietorship Firm in India

There is no law which requires a proprietorship to be registered like company and LLP. Sole proprietors do not have to consult with anyone else before deciding to call it quits. The Proprietorship firm can be easily closed by cancelling all your licenses and business registration so that in future, Proprietor is not liable to file any returns and compliance. Before closing the firm, Proprietor needs to terminate all agreement with vendors and clients to avoid any future consequences and liability. If you are thinking about closing your sole proprietorship firm, our dedicated team will help you.

Steps to close the Proprietorship Firm

If the Proprietorship firm is registered under GST, it is advisable to surrender the registration before closing the Proprietorship Firm to avoid the compliance filing burden and additional fee or fines.

 If the Proprietor is registered under any other licenses in the name of the business, then it should be terminated immediately before shutting down the business to avoid renewals, other consequence and return filing formalities.

Since Shop & Establishment Registration is granted by Labour Department of the State and in many states Shop & Establishment Registration needs to renew every year with a specified Fee. You must cancel the Shop & Establishment Registration before closing the Proprietorship firm to avoid renewal fee & non-compliance.

Since Trade License is granted by the local municipal corporation and needs to renew every year on or before 31st March with a fixed renewal fees. In case the Proprietor is about to shut down the business, it is always advisable to move the request to the concern municipal corporation for cancel of the registration.

The PAN of the Proprietor and Proprietorship firm is the same. Hence, there is no requirement of informing the Income Tax Department regarding the closure of proprietorship business. However, the Allocated TAN number is no more required by the Proprietor. The Proprietor is required to make an application to the jurisdictional AO for cancellation.

If you have entered any agreement with any party or vendor during the course of business, it is always advisable to terminate those agreements to avoid future consequences and financial liability. For example, if Proprietor has rented a place for business, then the rental agreement must terminate so that you do not have to pay rent in the future.

You have to close your business’s current bank account and also return the unused cheque book, debit and credit card to the bank, so that it can not be misused. For bank account closure Proprietor will have to make the application to the banker and can obtain closure certificate. 

Surrender of Trademark is known as “Withdrawal of Trademark.” If the Proprietor is willing to give up the rights of Trademark, Proprietor can submit the letter of Withdrawal to concerned Registry of Trademark to avoid renewal and other oppositions.

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