Thread by @theBuoyantMan

If you're starting a business in India alone, start as a sole proprietorship setup. Do not, I repeat, DO NOT start with an LLP or a Private Limited unless you legally require them for whatever business you do. Grow to at least 1-2 crores profit per year and then switch if needed.

We started our business as Private Limited. Starting as sole proprietorship allows you to focus on the business and growth first instead of needless unnecessary compliances and regulations, especially a lot of legal and compliance overhead government keeps coming up with.

Also, as a private limited company, you need to keep your books very tight, do the filings at the right time, otherwise be penalized heftily. By default, gov thinks a PVT LTD means promoters are rich. So, everywhere you go, hefty bribes are demanded.

Auditing process is painstaking. If you have an accounting team to take care of it, then fine. But, if you're a startup, and you're handling most of these things, as a founder you'll lose at least a month or two of your valuable time to cleaning up accounts & maintaining books.

Also, going round and round with auditor for auditing related things, having to know when and what to file in terms of compliance, having to be up to date with MCA, ROC, IT, GST, etc., related updates, and so on.

In the initial stages of your startup (at least until you make like 1-2 crores in profit) if you hire cheap auditing/accounting personnel (this includes hiring vakilsearch for their nincompoop level work), you're going to have to spend 2x cleaning up their mess.

If you make >50 lakhs in net profit per annum, you can afford to spend 50k-1L in hiring a proper auditor to take care of the auditing process, and you can afford to pay a decent accountant to take care of your books (part time basis first, and then full time).

But this is all once you see potential growth and grow out of the pitfalls of being an entrepreneur. In the initial stages when you're just starting out, these things act as motivation killers. As much as possible, avoid them.

If you're starting solo, start as a sole proprietor. If you're starting with someone else, get a partnership registered if need be. Definitely not a LLP or a Pvt Ltd. A lot of people I know do no registration at all until they see potential for business success.

Sure, LLP or Pvt Ltd is great - in terms of getting loans and stuff. Whatever tax you save being a Pvt Ltd, you'll spend that in legal and compliance overheads (at least until you're at like 1-2 cr net profit level). In the first couple of years you don't see profits anyway.

As a sole proprietor, you maintain the book of accounts as well as you can with Zohobooks or quickbooks and file your Income Tax and you're done. No need for any other hoola hoopla. Simple pure focus on building your business, and no distractions.