Advantages of a Sole Proprietorship


Authored by Rodney Southern in Business 
Published on 12-25-2008

When deciding to operate a business, one of the first things you must determine is if the business will be a sole proprietorship. This important decision will be one that will follow you through each step of the business, all the way until the business closes or is sold. There are a number of advantages to operating a sole proprietorship. Here are a number of the more prominent ones and why they are good for your business.

In a sole proprietorship, the owner is the bottom line to the company. They pay all the taxes as part of their own personal income taxes. They still have to maintain all of the same things that any other business does, however. They must be licensed, and follow all regulations governing business. This allows the business to get off the ground much quicker and with considerably less red tape and restrictions.

Once the business is off the ground and running, the sole proprietor can do whatever he or she deems necessary to run the business. All the decisions are up to them, and they answer to nobody in the form of board members or things of that nature. The rise or fall of the business falls directly on their decision making capabilities. This is a huge advantage for many that open a business, and it helps them to stay focused and on top of their business.

Just as the decision making falls directly on the owner of a sole proprietorship, so too does any debt or problems that the business incurs. This is solely left upon the shoulders of the owner, and he or she is directly responsible for any problem that the business may have. Debt can be directly taken from the individual in this situation.

Another huge benefit for a sole proprietorship is the fact that they do not pay corporate taxes. They only pay taxes on the profit of the business, just as they would under personal income taxes. The legal fees when getting started are also much smaller as they do not involve any more than the sole proprietor themselves. This leads to a very low start up cost in most cases.

The best part of a sole proprietorship, however, is the fact that when it comes time to sell the business, they are the only decision maker. The owner has full control to sell or transfer the business in a sole proprietorship. This can be a huge advantage if they are trying to manage getting out from under debt, or when they want to take advantage of a great offer. Many people start businesses as a sole proprietorship only to sell it once it is profitable.

Many businesses will decide to incorporate at a later date. This flexibility is very nice for many business owners. They can always look at this as an option if the business takes off. It is easy to go from sole proprietor to incorporated. The other way around does not make sense in most cases and does not work.

A sole proprietorship is made for the business that is solely driven by the ideas of an individual. They make take ideas and advice from others, but they want to be in the driver’s seat. This control over their own business affairs is usually at the forefront of most every sole proprietorship.


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