How to Register a Sole Proprietorship (Sole Trader) in Lesotho

Lesotho’s growing economy makes it an attractive place for freelancers, traders, and small business owners who want to formalize their work. Setting up as a sole proprietor is often the fastest and most affordable way to get started. Unlike forming a company, you don’t need large amounts of capital or complex paperwork to launch.

That said, registering a business still requires working through official channels, gathering the right documents, and paying modest fees. The process is fairly streamlined through the government’s One-Stop Business Facilitation Centre (OBFC), but it does come with some obligations—such as registering with the tax authority and keeping records for compliance.

The main draw of a sole proprietorship in Lesotho is the independence and flexibility it provides. You are in complete control of your business decisions, and you can start operating quickly. The main trade-off is that you carry unlimited personal liability for your business’s debts.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Lesotho?

In Lesotho, a sole proprietorship is commonly referred to as a sole trader. It may also be described as being self-employed or an independent contractor. These terms all describe one person legally running a business without forming a company.

How does a sole proprietorship (sole trader) work in Lesotho?

Sole Trader vs. Limited Company (Pty Ltd) in Lesotho

Before choosing a sole proprietorship, it’s helpful to compare it with other business structures available in Lesotho, such as a private limited company.

Step-by-step: How to register a sole proprietorship in Lesotho

Step 1: Check your eligibility

To register as a sole trader in Lesotho, you must either be a citizen or a legal resident with the right to conduct business. If you are a non-resident, you can still register, but you will need to provide a valid work permit or residence permit when applying for tax registration.

Step 2: Choose your business name

You can choose your own name or a trade name. Check availability via OBFC (online or in-person) and reserve a name for a period of typically 30–60 days in exchange for a small fee.

Step 3: Gather required documents

• National ID card or valid passport (certified copy)
• Proof of physical address
• Health inspection certificate for your business (if applicable), from the Maseru City Council or the public health office
• Completed licensing application form (e.g., MTICM002) from OBFC
• For non-residents: a valid work or residence permit

Step 4: Register with OBFC

Submit your documents and forms online or at OBFC. In some cases, officials may invite you for a short interview to review your application and confirm your information.

Once your documents are approved, OBFC will give you a date to return and pay the registration fees. After payment is processed, your trading license will be issued electronically and sent to you by email as a PDF.

Step 5: Pay registration fees and contributions

Fees typically range from M200 to M300 plus any reservation fee. You pay via the OBFC system or cash at their accounts counter, then you receive your license PDF via email

Step 6: Complete post-registration obligations

Once registered, obtain your Tax Identification Number (TIN) and register for income tax and VAT (if applicable) via RSL.

If you operate from physical premises, you must also register with your local council and apply for any sector-specific permits required for your type of business.

As a sole proprietor, you are responsible for issuing proper invoices to clients for all goods and services you provide. These invoices should include your business details, TIN, and the nature of the transaction. Keeping consistent records of invoices and receipts is essential for filing taxes and staying compliant.

Financial and tax obligations for sole proprietors in Lesotho

You are responsible for:

• Income tax: Sole proprietors are taxed as individuals, not companies. Profits are declared in the owner’s personal tax return and taxed at progressive rates: 20% on monthly income up to M 61,170 and 30% on income above this threshold (2025/26). Filing is done annually through RSL, using your TIN.
• VAT: If your annual turnover exceeds M2,000,000, you must register for VAT with RSL and charge VAT on your goods and services. Returns are usually filed monthly or quarterly. Businesses under this threshold may still register voluntarily if it benefits them (e.g., to claim input VAT on expenses).
• Social security contributions: Unlike employees, sole proprietors are not required to contribute to Lesotho’s social security schemes. These contributions—including mandatory pension or health fund payments—are applicable only to employer-employee relationships. As a self-employed person, you are free to arrange your own private retirement savings, health insurance, or other protections. Many freelancers and contractors in Lesotho do this voluntarily, but it’s not enforced by law.
• Record-keeping: You must keep accurate records of invoices, receipts, and accounts to demonstrate your business income and expenses. Documentation should be retained for at least five years, as required by RSL, in case of tax audits.
• Tax deductions and allowances: Deductible business expenses (such as rent, utilities, supplies, and professional services) can be claimed against your taxable income, reducing your overall tax bill. There are no specific small-business deductions listed, but proper record-keeping ensures you can claim all legitimate costs.

Launch your contracting career and stay compliant with Deel

Registering a sole propriertorship gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a sole trader in Lesotho?
None.

Do sole traders need to register for VAT/GST?
VAT registration is required if your annual turnover exceeds M2,000,000; otherwise, it is optional.

How much are the standard registration costs?
Typically between M200 and M300, plus a small fee for name reservation.

Can a sole trader hire employees?
Yes. Sole traders in Lesotho may hire staff, but they must comply with labour laws by providing employment contracts, registering for PAYE with RSL, and handling any applicable employee social security contributions.

How long does it take to register?
If documents are in order, you can expect registration in approximately 3–10 working days.

Can foreign nationals register as sole traders in Lesotho?
Yes, if they have a valid work or residence permit.

Do sole traders need a separate business bank account?
Not mandatory, but highly recommended for clarity in accounting and professionalism.

What happens if you stop working as a sole trader?
You should deregister with RSL and settle all tax obligations. Inform OBFC as needed for license cancellation.

Are there incentives or reduced rates for new sole traders?
No specific incentives noted; however, registration enhances access to government tenders, funding, and credibility.

Can I use Deel as a sole trader in Lesotho to get paid by international clients?
Yes. Deel allows sole traders and freelancers to receive international payments in multiple currencies with low fees and transparent exchange rates.

Does Deel generate compliant invoices for sole traders?
Yes. Deel automatically generates invoices that meet legal and tax requirements, helping you stay compliant with Lesotho regulations and beyond.

Can Deel help me with taxes as a sole proprietor in Lesotho?
Yes. Deel provides downloadable tax reports and payment records to simplify your tax filing. While not replacing an accountant, Deel enhances record-keeping and compliance.

Does Deel offer contracts for freelancers and sole traders?
Yes. Deel includes contract templates that are compliant with local laws, so you can work safely and professionally.

Can I access benefits through Deel as a sole trader?
Yes. Deel offers optional perks like health insurance, retirement plans, and other benefits—bringing more security to independent work.