When starting a business in Sri Lanka, one of the key decisions an entrepreneur must make is whether to register as a sole proprietor (under the local council) or to incorporate a private limited company (under the central government through the Registrar of Companies). While each structure offers its own advantages in terms of tax, legal liability, and image, one often overlooked but very practical difference between the two is the requirement for a commercial address.
In this blog post, we will explore this difference in depth and help you understand why it matters when registering your business in Sri Lanka.
1. Sole Proprietor Registration (under Local Council)
When registering a sole proprietor business in Sri Lanka, you must go through your local municipal council, urban council, or pradeshiya sabha — depending on the location of your business.
One of the key conditions imposed by most local authorities is the requirement for a valid commercial property or premises to operate the business. This means:
✅ You are required to show proof of a commercial location — usually a shop, office space, warehouse, or any legally approved premises for conducting business.
✅ Home-based businesses often struggle to get registered under the sole proprietor model unless they obtain approval or a special permit from the local council to use residential premises for business purposes.
✅ The local council may conduct a physical site inspection before granting the business license. They check for zoning compliance, building permits, and whether the property is authorized for commercial activities.
✅ Rent agreements or ownership documents (deeds) for the commercial property are often required as part of the application.
👉 Why this matters:
Many small entrepreneurs, freelancers, or startups want to operate from home in the early stages to save costs — however, under sole proprietor registration, this can be a challenge unless proper approvals are secured.
2. Company Registration (under Central Government – Registrar of Companies)
On the other hand, registering a Private Limited Company (PVT LTD) through the Registrar of Companies (ROC), which is governed by the Companies Act No. 7 of 2007, offers more flexibility when it comes to the business address.
✅ No requirement for a commercial property is strictly imposed when incorporating a company.
✅ You can register a company using your residential address or any address in Sri Lanka where the company can receive official mail.
✅ There is no mandatory site inspection by ROC to verify if the address is commercial or residential.
✅ You need to submit proof of address (such as a utility bill or a letter of consent from the property owner), but it does not need to be a formally approved business property.
👉 Why this matters:
This flexibility allows startups, professionals, freelancers, and even home-based businesses to easily incorporate a company without the need to rent expensive commercial premises — a major benefit in today’s digital economy where many businesses operate online.
3. Summary: Key Comparison
| Factor | Sole Proprietor | Private Limited Company (PVT LTD) |
|---|---|---|
| Registration Authority | Local Council | Registrar of Companies (ROC) |
| Commercial Property Required | Yes | No |
| Can Use Residential Address | Only with council approval | Yes |
| Address Verification | Site inspection required | No site inspection |
| Registration Time | 1-2 weeks | 3-5 working days |
| Cost | Low | Moderate |
| Suitable for | Small local businesses | Startups, growing businesses, online businesses |
4. Conclusion
Understanding this critical difference between sole proprietor registration and company incorporation helps you make the right decision for your business needs.
- If you already operate or plan to rent a shop or office space, and your business is local (such as a retail shop, salon, cafe, or service center), sole proprietor registration might be suitable.
- However, if you want more flexibility in using a home address, avoid zoning complications, and plan to expand or serve clients nationwide or internationally, incorporating a Private Limited Company can give you a more modern, scalable option.
5. How We Can Help
At 360 Accountants, we provide professional assistance for:
✅ Company Registration (PVT LTD) in Sri Lanka
✅ Sole Proprietor and Partnership Registration under local councils
✅ Guidance on selecting the right structure
✅ Preparing all necessary documentation
✅ Handling address requirements and council approvals
✅ Tax registration (TIN, VAT, EPF/ETF) and ongoing compliance
If you are unsure about which business structure is best for you or need help with registration, contact us today. We are here to simplify the process and support your business journey in Sri Lanka!
