Should an Indian freelancer exporting services be a sole proprietor or an LLP?

Most Indian freelancers who bill clients abroad, whether a UX designer on a US retainer, a copywriter for a German agency or a developer for an Australian start-up, start as sole proprietors without deciding to: you invoice in your own name and the money comes to your own PAN. An LLP is a choice you make later, usually when a second person joins or you want the business to be legally separate from you.¹

This guide compares the two on the points that matter for an exporter, using only points checked against the primary sources listed below. LLP tax rates and converting an existing practice are outside its scope; ask a chartered accountant (CA) or company secretary (CS) about those.

What is the legal difference between a sole proprietorship and an LLP?

A sole proprietorship is the individual carrying on business, so the business's debts are the owner's debts. An LLP is a body corporate formed and incorporated under the Limited Liability Partnership Act, 2008 (the LLP Act), and section 3 makes it "a legal entity separate from that of its partners" with perpetual succession, so a change in partners does not affect its existence.¹

The LLP column comes from sections 3, 6, 11, 34 and 35 of the LLP Act and section 58 of the Income-tax Act, 2025.¹³

Which freelancers should be a sole proprietor and which should form an LLP?

The choice between a sole proprietorship and an LLP depends on how many people own the business, how much it spends, and how much compliance you want to carry.¹³

The table reflects the LLP Act and section 58; your own numbers decide the tax column.¹³

How many partners does an LLP need, and who can be one?

An LLP needs at least two partners under section 6 of the LLP Act, and any individual or body corporate may be a partner under section 5.¹ Section 7 also requires at least two designated partners who are individuals, at least one of whom is resident in India, meaning a person who has stayed in India for at least 120 days during the financial year.¹

That rules out a one-person LLP. Say a solo video editor or tutor wants to separate personal and business liability: an LLP cannot do this without a genuine second partner.¹

How is an LLP formed in India?

An LLP is formed when two or more persons carrying on a lawful business with a view to profit subscribe their names to an incorporation document and file it with the Registrar, under section 11 of the LLP Act.¹

1. Line up at least two partners: section 6 needs at least two partners, and section 7 needs at least two designated partners who are individuals, one of them resident in India.¹
2. Subscribe to the incorporation document: the partners sign the incorporation document.¹
3. Get the compliance statement: the filing must include a statement by an advocate, company secretary, chartered accountant or cost accountant engaged in the formation, and by one of the subscribers, that the Act and rules have been complied with.¹
4. File with the Registrar: file with the Registrar of the State where the registered office will be.¹
5. Receive the certificate of incorporation: under section 12, once the requirements are met, the Registrar registers the document and issues a certificate within 14 days.¹

Fees, name reservation and the current e-forms are set by the Ministry of Corporate Affairs (MCA) and change, so this guide does not quote them; check with a CS before filing.

What annual filings does an LLP make, and when are LLP filings due?

An LLP files two returns with the Registrar every year: a Statement of Account and Solvency in Form 8, and an annual return in Form 11.¹²

Deadlines are from section 35(1) of the LLP Act and rule 24(4) of the LLP Rules, 2009.¹² The designated partners sign the Statement of Account and Solvency, and the LLP must keep books on a cash or accrual basis under double entry, preserved for eight years.¹²

Note: As notified in 2009, rule 24(8) of the LLP Rules exempts from audit an LLP whose turnover does not exceed ₹40 lakh in any financial year, or whose contribution does not exceed ₹25 lakh.² We did not trace every amendment since 2009, so confirm the current audit threshold, filing fees and additional fees for late filing with a CA or CS.

A sole proprietor files nothing with the Registrar. The proprietor's obligations are the individual's income-tax return and, if registered, GST returns.

What happens if an LLP files late or falls below two partners?

An LLP that files Form 8 or Form 11 late faces a penalty of ₹100 for each day the failure continues, under sections 34(5) and 35(2) of the LLP Act.¹

• Late filing cap: up to ₹1 lakh for the LLP and ₹50,000 for each designated partner, for each of the two filings.¹
• Fewer than two partners: if the number of partners falls below two and the LLP carries on business for more than six months that way, section 6(2) makes the remaining partner, if aware of it, personally liable for the LLP's obligations in that period.¹

Put both filing dates in the calendar in the year the LLP is formed.

How is tax calculated for a sole proprietor and an LLP?

A sole proprietor in a specified profession can calculate tax on 50% of gross receipts under section 58(2) of the Income-tax Act, 2025, while an LLP calculates tax on actual profit from its books.³

• Specified assessee: section 58(11) defines a "specified assessee" for row 3 (the old 44ADA) as "an individual or a firm, other than a limited liability partnership, who is a resident in India".³
• Eligible assessee: the "eligible assessee" for row 1 (the old 44AD) is an individual, Hindu undivided family or firm other than an LLP.³
• Limits: row 3 deems 50% of gross receipts as profit where gross receipts do not exceed ₹50 lakh, or ₹75 lakh if cash receipts are within 5% of gross receipts.³
• Profession test: row 3 applies only to a specified profession as defined in section 62(4).³

For example, a resident proprietor in a specified profession with gross receipts of ₹30 lakh, all received by bank transfer, would be taxed on deemed profit of ₹15 lakh under row 3.³ An LLP with the same receipts and ₹20 lakh of subcontractor costs would compute tax on its actual profit of ₹10 lakh, which is why high-expense practices can narrow the gap.³ See section 62 specified professions and can an LLP or company use presumptive tax?

Do GST, the LUT and the EDF work differently for a sole proprietor and an LLP?

GST, the LUT and the EDF apply to a sole proprietor and an LLP in the same way. The five conditions for an export of services in section 2(6) of the IGST Act turn on where the supplier and recipient are located, the place of supply and how payment is received, with no condition on the supplier's legal form.⁴

• GST registration: a supplier making only inter-State supplies of taxable services is exempt from registration up to ₹20 lakh aggregate turnover (₹10 lakh in special category States) under Notification 10/2017-Integrated Tax.⁷ The threshold is the same for both structures.
• LUT: each registered person files its own LUT in FORM GST RFD-11 on the GST portal for each financial year.⁵ A proprietor files under the proprietor's GSTIN; an LLP needs its own GST registration and its own LUT. See how to file an LUT.
• EDF: regulation 3(2) of the FEMA (Export and Import of Goods and Services) Regulations, 2026 applies to every exporter of services, with no exemption by legal form.⁶ See the EDF for service exporters.

Which payment platforms accept sole proprietors and LLPs?

Payment platforms differ: some accept unregistered individuals, some only registered businesses, and some name LLPs while others do not. The table summarises what each platform's own pages say. Platforms are ordered by estimated cost on published fees, cheapest first, then providers without full published pricing, A to Z. "Not named" means the page we relied on does not mention that type; it may still be accepted.^{8910111213141516171821222324252627}

Two services are left out of the table because they do not offer Indian exporters an account to receive business payments: Remitly's business service is for US-registered senders, and Revolut's India terms do not allow business use.¹⁹²⁰ For fees, FIRA and other criteria, see how to choose an international payment platform.

What are the common mistakes when choosing between a sole proprietorship and an LLP?

The most common mistake is planning a one-person LLP, which the LLP Act does not allow because section 6 requires at least two partners.¹

• Assuming presumptive tax carries over: an LLP cannot use section 58, so a proprietor who moves to an LLP loses the 50% deemed profit option.³
• Missing the Registrar deadlines: Form 8 and Form 11 are due every year, and late filing costs ₹100 a day.¹
• Reusing the proprietor's LUT: an LLP files its own LUT under its own GSTIN.⁵
• Incorporating before checking platforms: several platforms do not name LLPs, so confirm acceptance first.^{8910111213141516171821222324252627}

Before deciding, confirm with a CA or CS the current MCA fees and e-forms for incorporation, the current LLP audit threshold, the LLP's income-tax rate, and the tax treatment of moving an existing proprietorship's clients and assets into an LLP.