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John Miller (Business Strategist)     31 March 2020

How can a sole proprietor share the profits?

How can a sole proprietor share the profits of the sole proprietorship, in India? Can he share profits with the employee of the proprietorship?


 4 Replies

abhi jani   31 March 2020

Usually, in a sole proprietorship all the profit and loss are borne by the proprietor himself. However, in order to motivate the employees, they can be offered a share in profit by providing for a variable constant in their salary structure. Hence, the employees can be offered a fixed salary plus a variable % of the profit they earn for the business by accomplishing certain targets.

It is always advisable to stay compliant with the Income tax and other statutory compliance as applicable to your business. Hence, to get more details go through the article: Understanding Taxation for a Sole Proprietorship Firm

Hemant Agarwal ( Mumbai : 9820174108)     01 April 2020

1. AFTER paying all the govt. dues and Income Tax on the Profits generated, the Prop. Firm, can do whatever with its profits, which includes giving /sharing it with Employees /Gift /Donate /whatever ..... with anybody, without any restrictions.

Keep Smiling .... Hemant Agarwal


P. Venu (Advocate)     22 April 2020

The query suggests no legal elements.

juststart (Legal Services)     19 August 2023

Typically, within a sole proprietorship registration, the proprietor assumes full responsibility for both profits and losses. However, for the purpose of incentivizing employees, there exists the option to grant them a stake in the profits. This can be achieved by introducing a variable component in their salary structure. This approach involves offering employees a fixed base salary complemented by a variable percentage of the profits they contribute to the business through achieving specific targets.

It is of utmost importance to ensure strict adherence to Income Tax regulations and other relevant statutory obligations that pertain to your business. For a more comprehensive understanding, I recommend delving into the article titled "Understanding Taxation for a Sole Proprietorship Firm." This resource will provide you with additional insights and details on the matter.

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