Advantage and Disadvantage of Sole Proprietorship

In the previous blog we discussed about the different type of business structures one can choose from . Today I am going to write about the advantage and disadvantage of having Sole Proprietorship :

Sole Proprietorship is the easiest form of business structure over more than 70 % of business are owned and operated by sole owner .

Following are the advantages of operating as Sole Proprietor :

1. Ease of formation.
2.You control all your own decisions and the money you make.

3.Sole proprietors have the benefit of reporting tax on any income earned through their own personal tax return, rather than filing separately as a business – which can save time and hassle.

4.Flexibility in operating a business - Sole  proprietors can choose there own hours of operation , work part time , full time without worrying answering to anyone about your own business affairs (aside from your clients, of course).

 

What About the Disadvantages?

 

One of the reason many business owner seek to incorporate instead of operating as Sole Proprietor is Because of liability issue :

 

As a Sole Proprietor there is no legal distinction between the owner and the business, which puts your personal assets at risk in case of losses and debts . Business incorporation can limit the liability to the business assets protecting the personal assets of the owner.

 

If you plan to grow your business then incorporating is a good idea as financials institution  don't prefer to give loans to Sole Proprietorship , so raising the capital required will be difficult .

 

Whether you want to incorporate or run your business as Sole proprietorship will depend on what your goals where do you want to see your business in next five year .

 

Disclaimer : Blog is for informational purpose only . Please contact you Legal and Professional Advisor before taking any decision and action.