Business
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Sole Proprietorship vs Private Limited
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Simpler compliance vs limited liability and investor-readiness — the structural trade-off for small business owners.
Visual Comparison
Key Differences
| Feature | Sole Proprietorship | Private Limited |
|---|---|---|
| Liability | Unlimited personal liability | Limited to company assets |
| Compliance | Minimal — ITR + GST | Annual ROC filing, audit, board minutes |
| Tax rate | Slab rate (up to 30% + cess) | 25% corporate tax (turnover < ₹400 cr) |
| Investor-ready | No — cannot issue shares | Yes — equity investment possible |
| Setup cost | ₹0–5,000 | ₹10,000–25,000 |
When to Choose Which
Choose Sole Proprietorship
- Starting out with < ₹50 lakh turnover
- No external investment planned
- Solo service professional
- Low compliance preference
Choose Private Limited
- Planning to raise investment
- Turnover > ₹1 crore
- High-risk business needing liability protection
- Multiple founders
Frequently Asked Questions
Proprietorship is simpler and cheaper to run. Pvt Ltd is better if you plan to raise funds, scale, or need liability protection.
25% for companies with turnover < ₹400 crore, plus surcharge and cess. Effective rate ~26%.
Yes — transfer assets and liabilities to the company with CA assistance.
No minimum paid-up capital requirement. Can start with ₹1 in share capital.
CA fees for audit + ROC filing typically cost ₹20,000–₹60,000/year for small companies.