Sole Proprietorship is a type of business ownership and let’s see what are the possible pros and cons of sole proprietorship. If you miss our article about types of ownership click here and see all the forms of business ownership.
Before getting into the advantages and disadvantages of sole proprietorship, you should know about sole proprietorship. If you are already familiar with this form of business ownership, you are good to skip the next section and move directly to the pros and cons of sole proprietorship.
Sole Proprietorship – Business ownership
Sole proprietorship as they name suggest refers to a business owned and run by single person. There are no partners and no investors. The business owner invests and runs the business alone. This type of business is simplest in terms of understanding the structure and easiest to set up.
It’s one of the most famous type of business ownership and online businesses follow this type because of its simplicity. And we all know that simplicity is the ultimate sophistication. The overall responsibility of the business lies on one owner.
Sole proprietorship doesn’t really mean that you can’t have employees or managers working for you. It means that business can have only one owner or boss. However, this form of business ownership is highly recommended for running small businesses mostly.
Business owner knows everything about legal notices and bank statements. Owner faces and handles legal notices and financial issues himself because there is nothing hidden between the business and the business owner.
Sole Proprietorship Pros and Cons
Some of the important advantages and disadvantages of sole proprietorship are as follows:
- You get the complete control on your business
- The tax system is quite easy and simple to understand
- Sole Proprietorship setup is a low cost setup
- Keeping track of your record is comparatively simpler than other forms of ownership
- No tension of any kind of filing every year
- Handling money is easier than any other form
- The income generated is the personal income
- You are the lone decision maker and therefore you can quickly make a new move according to the circumstances
- You are not restricted by anyone
- Making a separate bank account for business funds can make be so beneficial in Sole Proprietorship
- All the assets of the business belongs to one person who is the owner of the business
- Managing the overall system is flexible as compared to other forms
- If due to any reason, owner wants to close or stop all the operations, its only in his/her hands as he/she is the only boss
- You are 100% responsible for all loses or if anything goes wrong
- If unfortunately the business owner dies, the business will terminate most probably
- Fewer assets is a major issue faced by Sole Proprietor as arranging financing for a long period of time can become so problematic
- Continuation of business is an issue and in corporations it is not
- Due to the fact that you are the only owner and have the rights to make decisions, there is no one to guide you if some of your decisions might have chances of going the wrong way
- Unlimited liability
These are few advantages and disadvantages of sole proprietorship. Comment us below if this sharing was helpful. Also see our Earning section for more interesting and amazing content. Keep visiting for more entrepreneurial and business knowledge.