The Advantages of Sole Proprietorship

The most common type of business, a sole proprietorship is owned and operated by one person. Responsible for all aspects of the business, the sole proprietor must be accountable for all financial debts and liabilities incurred. However, this also means the owner of a sole proprietorship reaps the rewards without having to share the profits.

Simplicity

Less costly to start, the owner of a sole proprietorship is only responsible for complying with licensing requirements, zoning ordinances and local regulations. There is much less paperwork and formalities which must be followed which make a sole proprietorship much easier to start up than a corporation.

Control Factor

The primary advantage of operating a sole proprietorship is that the owner has complete control over every aspect of the business. A sole proprietor can sell the business to another whenever they see fit. They can keep the business running as long as they like and can easily pass it down to heirs if they desire. Many sole proprietors might appreciate not having to answer to a boss and not having to ask for permission or approval before making a business-related decision.

Profits

Another major advantage of owning a sole proprietorship is that, minus income tax, there is no profit sharing. However, maximizing profit potential is also up the sole proprietor. There is no one else to turn to if profits are low and more funds are needed to keep the business running.

Taxes

In a sole proprietorship, there are no business taxes which must be paid by the owner, such as payroll taxes. The only taxes which must be paid are income taxes, just like every other citizen might be required to pay. However, the sole proprietor must be responsible for keeping accurate records of all money coming in and going out to maximize their tax deduction. The sole proprietor is responsible for correcting any discrepencies on their tax returns.

Types

Sole proprietorships are generally more suitable for those who can manufacture their own goods or carry out their own services. In contrast, many corporations have to risk a lot of capital by purchasing large amounts of inventory which is subject to depreciation.
For instance, a sole proprietorship structure would be appropriate for a person who cleans houses, as it requires very little investment. Another example would be a person who sells items online or makes their own food products from scratch.

References

• About Sole Proprietorships