I am a freelancer front-end web developer based in India. I have worked with clients in Canada, US and India. I have been freelancing full-time since the past three months and the projects are getting bigger with each client. Timelines have increased from 2-3 weeks to 1-2 months. I have also been getting graphic and other related work done from other freelancers who I pay on a project basis. In general things seem to be going upswing.
Recently I have decided to start a separate account for my business and somebody asked me whether I was a business entity or just an individual.
What are the benefits of becoming a business entity? How do I go about setting this up in India?
You'll need to ask a legal or tax advisor in India, but in non-country specific terms the benefits of a business entity rather than an individual trading in your own name are:
Tax benefits — as a business entity you may pay less, or different taxes, and may be able to reclaim sales tax or benefit from other tax incentives for businesses.
Liability sheild — a common reason to incorporate a business is to create a liability shield between yourself and your business, so for example if a client sues you, your house etc… are somewhat protected, the extent of this protection varies from country to country.
Employees — in many countries, in order to employ a person you need to be incorporated as a business entity and register with the relevant government body. Obviously this only applies if you intend to hire a full time employee and not just contractors.
Legitimacy — not a great reason to incorporate but a number of large corporations will only deal with other business entities, if your clients are in government or multinational business this may be a reason to do so.
Of course as a UK business owner with knowledge of US and EU businesses laws I may be missing something specific to India, other's may be able to help more but ultimately you should check with a local tax or legal advisor.