isn't the tax burden for sole proprietorship higher than for say limited company? 30 vs 25 iirc?

you can claim as many expenses as you like, in companies there are restrictions, there are deferred tax assets and liabilities because of companies act and income tax act depreciation difference. There is MAT applicable sooner than sole proprietorship i think.

lets just say it is easier to "appropriate" the books as a sole proprietorship.

you have to pay mca fees for your authorized capital, one off but if you are doing serious business, it costs.

i know, 5% "might" sound a lot in taxes but by fudging some numbers, by not paying complaince fees, by not being on the hook for a "lot of compliance" and the penalties that come up, it does not sound worth the risk....

Look, if you are doing big business, want to raise money from the public, sure go ahead but not otherwise.

> but by fudging some numbers

And this is the corruption mentality right there.

> you don't need to set up a company in india to do business

You do if you want outside investment. Or if you want professional management. Or if you want to seriously engage in international business.

What you say is true: most businesses are sole proprietorships. But that's a significant and manufactured barrier to growth.

Unfortunately you need to incorporate if you want to raise venture funding. You'll also struggle to get taken seriously by good tech talent if you try to hire them as a proprietorship.

Depends. The comment you replied to has a point. I have a family business. From personal experience this is how it works in practice for most entrepreneurs.

As for funding and business strategy, it will get bit tricky because you will now have to think of different ways of financing instead of VCs. But it is nothing different than VC financing (and you get to keep 100% of your company).

You need limited liability at larger scale and an official entity to get low interest loans, support and above the counter investor funding. These systems need new company centred reform and redesign to remove friction causing elements like OP describes to enable Indian entrepreneurship to realise its untapped potential in India as well as overseas. The amount of bureaucracy left behind by the British and the layer upon layer of mindless inefficiency added since is stifling innovation, adaptation and growth like nothing else.

What makes me pessimistic is the place bureaucrats still occupy in the social hierarchy. Even today, getting a government job carries tremendous prestige, especially outside urban areas. Becoming an IAS/IPS officer is the most prestigious thing you can do as an individual.

Bureaucracy will remain obdurate as long as members of the bureaucracy are feted by society. Ideally, bureaucrats should be invisible. But in India, IAS/IPS officers make headlines regularly.

I won't get even started about the sheer amount of man hours wasted in preparing for administrative exams. Statistically, less than 0.1% of the people preparing for IAS exams will actually be selected. The remaining 99.9% waste YEARS of their lives in this futile endeavor instead of actually building and learning.

I remain bearish on India as long as the bureaucracy remains paramount.

> Becoming an IAS/IPS officer is the most prestigious thing you can do as an individual.

If you are in UP and Bihar. That's not true for the rest of the country.

Is that because of their geographical proximity to New Delhi, the capital?

No, it's because these states have fewer options.

True in Rajasthan and Madhya Pradesh as well (have lived there for years).

Between these four states alone, we're talking about 40% of the country's population.

If more than half of your country believes something, it can be said to be the majority opinion.

You wrote: <<Between these four states alone, we're talking about 40% of the country's population.>>

Google Sensei tells me:

    UP: 204.2M
    Bihar: 99.02M
    Rajasthan: 68.89M
    Madhya Pradesh: 73.34M

Not even close to 40%. Population of India is about 1.3B to 1.4B.

Those numbers are way too old. Even by the 2011 census, UP was nearly 200M with a decadal growth rate of 20% in the previous decade. Bihar was 104M with a 25% growth rate.

Even with more muted growth, current population would be 230M+ for UP and 125M+ for Bihar.

Not really.

IAS folk make on the order of a $1M/pa with all their kickbacks. They often even get to send their kids to study in the West for "free" through "scholarships" (as a quid-pro-quo for compromising national interest). The demand is quite high (see marriage portals).

IPS is one tier lower. Though, anyone who has studied the hallowed history of the former commission of Mumbai knows this is also not something to sneeze at.