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Perks and snags of sole proprietorship

By Samantha Garner | June 14, 2014

A sole proprietorship is an unincorporated business owned by one person — the sole proprietor. This is the oldest, simplest and most common form of organization for a company. As the business owner, you own all assets, earnings, and profits. But you also hold all the responsibilities (including legal and debt), obligations and liabilities.

Let’s take a look at the perks and snags of the sole proprietorship.

Perks of a sole proprietorship

  • The least expensive form of ownership; low start-up costs.
  • Most freedom from regulation.
  • Simple to start and dissolve.
  • There are tax advantages for the owner.
  • The business owner has complete control over the company and decisions.
  • Smallest amount of working capital required.
  • Owner has complete control over the income generated by the business.
  • Owner has complete access to profits.
  • Flexibility.
  • Easiest to exit.

Snags of a sole proprietorship

  • The business owner is legally responsible for all debts.
  • Unlimited liability (not separate by law; can be personally liable for all debts even if it means paying debts with your personal assets).
  • Business can’t continue in absence of owner.
  • Harder to raise funds from personal savings or loans.
  • Higher personal tax rate.
  • It’s often harder to find high quality employees.
  • Limited resources and opportunities for growth.
  • Some employee benefits are not deductible from business income.
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