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Sole proprietorship
Having categorized the business into different types, you need to take a closer look at each of them so that you choose the right structure for your business.
In sole proprietorship business there is no legal no separate existence from its owner. All debts of the business are debts of the owner. It is a "sole" proprietor in the sense that the owner has no partners. A sole proprietorship essentially means a person does business in their own name and there is only one owner. A sole proprietorship is not a corporation, it does not pay corporate taxes. Instead of that the person who organized the business pays personal income taxes on the profits made, making accounting much simpler. A sole proprietorship also does away with double taxation which happens in big corporations.
This form of business structure has its own advantages and disadvantages, a few of them are as follows:
Advantages
You could opt for this structure owing to the numerous benefits it provides small businesses
- Among the primary benefit it provides is the singular ownership. The makes business transactions and dealings easy
- This form of structure also provides an easy estimation of the functioning and performance of the business
- There is better control and business administration possible since there is only one owner
- This also enables easy and speedy decision making since there is no hierarchy to seek approval from
- In most cases, there are no legal formalities to forming or dissolving a business
Disadvantages
- A sole proprietorship business finds it difficult to raise it finances and capital since shares of the business cannot be sold
- Its sense of legitimacy is limited and smaller when compared to a corporation or limited liability company
- This form of business will have unlimited liability, therefore, if the business is sued, it is the proprietor's problem
- Another 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 limited liability company
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