Advantages & Disadvantages of Small Businesses

Those who have worked in corporate America can appreciate owning their own businesses. Owning a small business gives one the independence and freedom most people cannot enjoy. Owning a small business can also give the ability to connect with many other small-business owners through networking. Although owning a small business can be rewarding, there are advantages and disadvantages to it and this guide will explore them.

Features

If you operate your business as a small business, most likely you will operate as a sole proprietorship. This form of business is the least expensive to operate. It puts the owner in full control of the business. The owner also receives all income that the business makes. As a sole proprietor, you can take advantage of several tax deductions.

Warning

While your business is in the start-up phase, you can expect and plan for your finances to be limited. Be sure to prepare for this and budget wisely for unexpected expenses that may occur. If you plan to operate out of your home, you will have to be disciplined. If you share a home with others, set aside a private area so there is no interference. If you operate your small business as a sole proprietor, you are also 100 percent liable for all the debts of the business.

Time Frame

You should schedule time that is dedicated to just filing and getting your business organized. Buy a ledger to help you keep good records of your business transactions. Producing a successful business takes commitment and real quality time. It may be a slow process in the start-up phase of the business. Owning a small business takes commitment

Geography

It is important for small businesses to make sure that their business complies with all the local laws and regulations. There are also local zoning laws that your business may have to comply with. The assessor's office in your state can advise you of what may be required for your business. You should also contact a local building inspector to be sure that your business has met all agreements that may affect construction for your business.

Misconceptions

Many feel that it is harder for small-business owners to get customers or clients, however, many customers are attracted to small businesses. Many people have voiced the opinion that they feel small businesses provide better customer service because there is more personal contact. The small businesses are not consumed by so much business, like larger businesses, so they have the time to provide their customers with personal attention.

expert Insight

Despite the many positives of being your own boss, the deck is often stacked against small businesses. The Small Business Administration reports that most small businesses fail within the first year. Almost 95 percent of them fail within the first five years. Some business owners even return back to work after attempting to start their own business. Small-business owners have to rely upon a small amount of resources in order to survive. Most of them don't have as much capital as larger businesses. Many also become frustrated at the amount of long hours that are required in the start-up phases of the business. Bureau of Labor Statistics reports indicate that small-business owners usually earn earn 70 to 80 percent of the salary that those in the workforce earn.

Resources

• Small Business Administration