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| The main advantages of a sole proprietorship are that they are easy to start up, they are subject to fewer regulations relative to other types of businesses, the owner has full autonomy with regard to business decisions, and they are easy to discontinue. <ref name="Constructaquote.com">"Becoming a sole trader - the basics," Constructaquote.com, http://www.constructaquote.com/home/business-guides/becoming-a-sole-trader---the-basics.aspx</ref> | The main advantages of a sole proprietorship are that they are easy to start up, they are subject to fewer regulations relative to other types of businesses, the owner has full autonomy with regard to business decisions, and they are easy to discontinue. <ref name="Constructaquote.com">"Becoming a sole trader - the basics," Constructaquote.com, http://www.constructaquote.com/home/business-guides/becoming-a-sole-trader---the-basics.aspx</ref> | ||
| Another advantage is that one takes all the profits of the business. This is the main reason that most businesses are of this type. | Another advantage is that one takes all the profits of the business. This is the main reason that most businesses are of this type. | ||
| A sole proprietorship is not a |
A sole proprietorship is not a corporation; it does not pay ]es, but rather the person who organized the business pays self employment taxes on the ] made, making ] much simpler. A sole proprietorship also does not have to be concerned with ], as a ] would. | ||
| A sole proprietor usually has a quick decision process and doesn't have any opposition when making a decision as he or she has total control of his business. All profits and losses accrue to the owner. | A sole proprietor usually has a quick decision process and doesn't have any opposition when making a decision as he or she has total control of his business. All profits and losses accrue to the owner. | ||
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A sole proprietorship also known as a sole trader, or simply proprietorship is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner (subject to taxation). All assets of the business are owned by the proprietor and all debts of the business are his debts and he must pay them from his personal resources. This means that the owner has unlimited liability. It is a "sole" proprietorship in the sense that the owner has no partners (partnership).
A sole proprietor may do business with a trade name other than his or her legal name. This also allows the proprietor to open a business account with banking institutions.
Advantages
The main advantages of a sole proprietorship are that they are easy to start up, they are subject to fewer regulations relative to other types of businesses, the owner has full autonomy with regard to business decisions, and they are easy to discontinue. Another advantage is that one takes all the profits of the business. This is the main reason that most businesses are of this type. A sole proprietorship is not a corporation; it does not pay corporate taxes, but rather the person who organized the business pays self employment taxes on the profits made, making accounting much simpler. A sole proprietorship also does not have to be concerned with double taxation, as a corporate entity would. A sole proprietor usually has a quick decision process and doesn't have any opposition when making a decision as he or she has total control of his business. All profits and losses accrue to the owner.
Disadvantages
A business organized as a sole trader will likely have a hard time raising capital since he has to make up for all the business's funds. The owner of the business has unlimited liability as he is responsible for the business's debts because he has control over the business.
A disadvantage of a sole proprietorship is that as a business becomes successful, the risks accompanying the business tend to grow. To minimize those risks, a sole proprietor has the option of forming a corporation, or, more recently, a Limited Liability Company.
References
- "Becoming a sole trader - the basics," Constructaquote.com, http://www.constructaquote.com/home/business-guides/becoming-a-sole-trader---the-basics.aspx