How one can setup a Proprietary Trading Firm, any registration needed with SEBI, other formalities, etc?

If you are trading your own money (proprietary trading), there is no regulations as such.

A partnership/LLP would be better than a pvt ltd firm in terms of taxation. As a pvt ltd firm, if you want to take out your profits, you have to pay an additional dividend distribution tax of 15%. So your effective taxation can go as high as 50%.


any difference between running a prop trading firm as a limited company vs. a sole proprietor/ partnership firm ( especially, any taxation differences with regards to profits) ??

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In pvt ltd company you can pay your director(in this case trader) whole profit and you don’t need to pay dividend tax.

How much time it takes to complete all procedure to start prop trading firm. ( From exchange and SEBI) (excluding company registration and other setup for trading )

Do we have to get alpha membership for this ?

hmm… if u want to just setup a trading account under a company, that is just a few weeks. If you want to get an alpha membership and all, atleast a year.

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Does prop trading company require to get alpha membership ?

No not required.

Can we trade in cash segment ? Or it will require to get NBFC license ?

I have gone through many post regarding this and I am really confused.

I want to trade in Cash Segment, Future N Options and also want to invest.

Do I need NBFC license for this If I register Pvt ltd ?

Ah. If you want to be a Pvt ltd company doing only trading, you will need an NBFC license (more than 50% of revenue from financial activities) or an alpha membership on the exchange.

Best to be a partnership/LLP if you want to avoid this.


LLP can’t be incorporated for investment/trading purposes.
I think being a sub broker could also work around but I think sebi has merged it with APs.
Another way might be to take membership of say calcutta stock exchange (charges are less) and then company can open accounts with as many brokers as it wants without attracting the deemed nbfc provision of RBI. @nithin I am not 100% sure though, can you clarify.

I think core investment company without taking public funds don’t need NBFC.

I found this article on Cleartax website.

Can we start sole prop firm ? Without any partner ?

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Yep can. I think the demat account will have to be in the individual’s name.

@mohitmehra can you confirm?


Hi Bharat, if you want to trade as a sole proprietor, there isn’t really a need to register or document this separately. A sole proprietory firm is pretty much the individual himself. You use your own PAN everywhere - demat account, bank account, etc.

In case you are already running a business under a certain trade name and that is the name mapped in your bank account, when you open your trading & demat account you can submit a declaration confirming that the name in your bank is different but belongs to you. The demat account will be opened in your legal name and will be mapped to your individual PAN.

In terms of taxation, there are no differences between trading as an individual or mapping your sole proprietorship bank account with your trading account. In both cases, income from trading can be classified under the business income head for you. You can learn more about some of the tax ramifications of trading in the taxation module on Zerodha Varsity.


I was talking about proprietary trading firm. Not sole proprietor trading account with zerodha.

A proprietary trading firm as in a member of the stock exchange that trades on their on account?

If yes, you can be a member of the exchanges even as an individual. Check the categories of membership here. This is the deposit structure:

There is also an alpha membership category for proprietary trading firms who want to have no clients (or at most 50 clients). Check the deposit structure here.

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Hello @mohitmehra @nithin
Do we need NBFC license in case the income from trading is more than 50%?
And can we hire employees who trade for me?
Kindly clarify please

Kindly reply @mohitmehra @nithin

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In cases if we want to show trading as a business income