EPF Rules for Sole Proprietors: Does Employee Count Across Businesses Matter?

Dear Professional,

I want to know if the provisions of EPF are applicable to me under the following circumstances:

- I am the sole proprietor of 3 concerns.
- The businesses under these concerns are of the same nature.
- Separately, there are fewer than 20 employees in each concern, but if consolidated, the number of employees increases above 20.

Thanks,
Sumit Chawla

If you have registered as three different legal entities, then PF will not be applicable. If you are operating under one legal entity and have done the split for your internal management, then PF will be applicable.

My queries related to your post. Is there an interconnection between these three units, and is there common supervisory, financial, or managerial control over the three firms? If this matter gets agitated in a court of law, these kinds of questions are likely to arise.

Understanding the Sole Proprietor System

The problem with the sole proprietor system is that there is no distinction between the proprietor and the business. Therefore, in the given circumstances, all three businesses will be counted as the same, and you will be liable for PF along with a penalty.

Considering Business Structure Changes

It would be a good idea to convert each of these three into separate LLPs, partnerships, or private limited companies. However, you need to verify the cost-benefit analysis of maintaining three separate organizations: they all have audit and compliance requirements, as opposed to the savings on PF.

Dear NATHRAO Sir,

In terms of financial, managerial, and supervisory control, all three concerns are under the same person. Additionally, I would like to bring the following information to your attention:

- The business is operated from the same premises.
- The nature of business being conducted is the same.
- Since all three concerns are proprietorship concerns, the PAN involved in all three cases is the same.

Regards,
Sumit Chawla

In my opinion, you will have to pay PF to your employees.

Kindly seek appropriate legal opinion on the subject at the earliest.

Dear Nathrao Sir,

When it comes to financial, managerial, and supervisory control, it is all under a single person for all three areas. Additional information that I would like to bring to your attention is as follows:

- The business for all three concerns is managed from the same premises.
- Since all three are proprietary concerns, the PAN involved in all three cases is the same.

Regards,
Sumit

Dear Mr. Sumit Chawla, Please reply to my queries before I post my advice on your post:

1. Are you drawing a salary, or is your remuneration or profit-sharing structured differently and approved through a Board resolution, if the amount is less than Rs. 15,000 per month?

2. All three are operating with individual factory licenses and should be treated as separate units.

3. Have you ever been covered under the EPF benefits?

Regards, RDS Yadav Management Adviser and Trainer Director, Future Institute of Engineering and Technology

I don't think you really searched.

A simple question put in the search button on the citehr website gave me 125 posts on this matter: [Employers contribution PF deducted from salary](https://www.citehr.com/results.php?q=Employers+contribution+PF+deducted+f rom+salary&submit.x=0&submit.y=0).