Sole proprietorship is a type of business owned, managed, and operated by a single individual. Company profits are treated just like the owner’s income, and any money owed by the company incurs are considered to be the owner’s personal debts. One advantage of a sole proprietorship is that compared to the other forms of ownership, there are minimal cost and paper work involved with forming it (Kelly & Williams 2017). It’s an advantage for entrepreneurs who are ready to start a business. The owner has complete control of the business and can operate it how he or she chooses. Another advantage of a sole proprietorship is the owner has a feeling of pride ant personal satisfaction. There are not many legal requirements for a sole proprietorship company to operate. Low monitoring charges among the investors gives the company the ability to make on the spot decisions (Baik, Lee &Lee 2015). Another reason the sole proprietorship company has an advantage is that there is a low chance of being threating by competitors. One of the disadvantages of a sole proprietorship is the lack of ability to raise money for the company. Suppliers or creditors may not be willing to lend money or resources to the individual. The company has to rely on their own money or wealth in which they generate. Personal debts and any other unforeseen events is the owner’s responsibility (Kelly & Williams 2017). For instance if the sole proprietorship company gets sued and the person suing wins, the court can
| The partners are jointly and severally liable for business debts and obligations. The partners are held personally responsible for the business and may be sued personally for liability. Partners’ personal assets are subject to lawsuit(s) made against the business. Lack of continuity; death of a partner may end the partnership/business if a buy/sell agreement is not in place. Disagreements may be difficult to resolve.
Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.
2. Why do many entrepreneurs initially set up their businesses as sole proprietorships? Why do many successful entrepreneurs eventually decide to convert their sole proprietorship to some other form
• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.
Sole Proprietorship would give you complete control since you assume all the risks, which mean you get all the profits, but you also suffer all the losses and liabilities. There is little to no paperwork to be done with a sole proprietorship. You only pay personal income tax to include Social security. The business doesn’t have to file a tax return, but you are still liable for payroll, unemployment and compensation taxes (Clarkson, Miller, & Cross, 2016).
LIABILITY – The owner is held responsible for all debts and expenses accrued by the company via the concept of unlimited liability. If the expenses and debts aren’t satisfied, the owner of the business can be sued for breach of contract.
disagreements will happen (is not when it happens). Everyone that runs a business always has his or
Having a sole proprietorship has many advantages and disadvantages for PODS. Some advantages to having a sole proprietorship would be the ease and cost of formation, having more flexibility and control, able to make quick decisions, minimal legal costs, closing business distribution and use of profits (Ferrell, Hirt, and Ferrell,2014) This is a wonderful option for someone who is just starting out and wants an easier way conduct business. Sole proprietorship also can have some disadvantages such as only having access to limited funds, lack of continuity due to investors not wanting to invest their money into something that has little or no history (Ferrell, et al., 2014). Most new business owners are not able to hire employees which have the qualified skills needed to get the company up and going successfully.
Sole trader-it’s a business that is owned by only one person and it can have one or more employees. This type of business organization often succeeds because the owner has total control of businees, the owner keeps all profit and it’s cheap to start-up,but also it can be difficult to raise financial,it may be difficult to specialise or enjoy economies of scale and can also have problems with continuity if sole trader retires or dies.
The advantages to the sole proprietorship are single control over the business and its decisions, easy to start up, less regulations and paperwork burden that the other types of business. The disadvantages are unlimited liability for their company debts and actions. The law does not recognize any distinctions between the owner’s business assets and personal assets. Banks are very skeptical about lending to these types business because there is only one person to hold liable for repaying the debt.
assets of the business owner can be taken to pay off business debts since the two are not
All you need is money and a realistic vision. 4) Another advantage of a sole proprietorship is that you pay lower taxes. This happens because as you own your own business, the earnings are considered as the owner’s personal income. Because of this, the sole proprietor may be subject to lower taxes than other forms of businesses, such as a partnership or corporation. 5) In addition to all the other advantages listed, another advantage of owning your own business is that you, the owner determines how much you want your firm or company to grow. You decide if you want to stay a small business or expand, whether it be locally or nationally. This can be advantageous because the owner can determine whether it’s better to stay small or grow. If you’re business is successful, you may want to expand to reach more and more clients, helping you make more money and to establish your firm as a successful one. Or you might think that it might be better to stay small and local, because you might not want to take a chance because you might not want to mess with a good thing. Whatever the situation, the owner decides what suites the company.
First and foremost, what is a sole proprietorship? A sole proprietorship is a unincorporated business with one manager who pays individual salary assess on benefits from the business. A few focal points of a sole proprietorship are that the holder settles on all the choices, they are their own particular supervisor, and any benefits have a place with the manager. A few impediments are that the manager may do not have the capacity to purchase the right supplies, do bookkeeping, and so on. In the event that the business loses cash, so does the manager. Banks can guarantee the individual assets of the holder in the event that it comes down to it. An alternate inconvenience is that if the manager is sick, the business does not open.
Across the United States, the majority of small businesses are owned and operated by one person, which is called sole proprietorship (Liuzzo, 2016). As the most widespread, least expensive business to establish, many small business entrepreneurs tend to take this path to avoid the need to hiring employees, pay for expensive locations, evade corporate taxes and to maintain complete control of all business transactions. Evident by the 2013 tax returns, the benefits of sole proprietorship sound appealing with approximately 24.1 million individual income tax returns reported sole proprietorship activity, a 2.2 percent increase from 2012 (Dungan, 2016).
Lets get into the disadvantages of the sole trador now which consists of three and the main disadvantage is that you, as the owner of the business, are solely liable for any consequences of business failure or any other