There are three business structures today- sole proprietorship, partnership and corporation. Benefitsof each business structure vary. If you only have a little capital and wish to build your own name in the business world, thenyou should look into creating a sole proprietorship.
Based on what I’ve gathered, a sole proprietorship company is when only one person fully owns the company legally. The sole proprietor is the one liable for any unfortunate events that can happen to the company. Common business ventures sole proprietorsoperate most frequently are direct selling, contractors, and consultation services.
5 Advantages of Sole Proprietorship
1. Low Start-Up Costs
According to Darrell Zahorsky,
Limited capital is a reality for many startups and small businesses. The costs of setting up and operating a corporation involve higher set-up fees and special forms. It’s also not uncommon for a lawyer to be involved in forming a corporation. Read the full story here.
Sole proprietors have little start up costs because they do not have to pay a lawyer to start a business. In addition, company registration is easy compared to that of a corporation.
2. Handling Money is Not a Big Problem
Handling money for the business is easier than other legal business structures. No payroll set-up is required to pay yourself. To make it even easier, set up a separate bank account to keep your business funds separate and avoid co-mingling personal and business activities.
Sole proprietors don’t deal with the complex procedures and set-ups like other business structures practice when it comes to handling money. You don’t have to deal with setting up payroll and the likes. For those who choose to do small business, I believe that sole proprietorship business structure is just right for you.
3. Healthcare Reimbursement Arrangements
Savvy sole proprietors can also use Healthcare Reimbursement Arrangements (HRAs) to get access to healthcare with the added benefits of double tax deductions, Read the full story here.
says Lahle Wolfe.
According to the law, sole proprietors will not shoulder the medical expenses of their employees. However, if they employ a spouse or family member, the healthcare reimbursement arrangement is then applied. This tax deduction can be a disadvantage for employees employed by sole proprietors. So it’s best that you know your corporate laws.
4. Absolute Control
According to buzzle.com,
Decision making power lies with a single person. The proprietor has complete control over each and every aspect of the business. He has full legal and financial responsibility. Hence, there is no question of any kind of conflict arising due to difference of opinion related to business policies. This is one of the primary advantages. Read the full story here.
What I like best in a sole proprietorship is that I have a full control of my business. I don’t need to seek approval with the investors or the board of directors. This makes it less stressful for me because there will be no disagreements and there will be less stress when it comes to decision making.
5. Free from Mandatory Outside Audits
According to Lahle Wolfe,
If you do not have to pay someone to do your business taxes for you, the savings could easily amount to several hundred dollars. You will also not have to pay for an independent audit, which can run into the thousands of dollars.
I think only corporations and limited liability companies are mandated for an outside audit. Sole proprietors only need an accountant or auditor within the company to audit financial statements for the company.
Those are just some of the reasons why you should choose to be a sole proprietor. If you are not a team-person, then I guess you should opt for this type of business structure where you can decide on your own without the fear of disagreement.
Do you think sole proprietorship is for you? Please share your thoughts in the comments below.
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