Perks and snags of sole proprietorship

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.