Advantages Of A Sole Proprietorship Law Company Business Partnership Essay

Published Date: 02 Nov 2017

It is such type of business in which a person himself is the owner of all the assets of the company and it is totally opposite of corporation and partnership, and such a person who does such kind of business is called as sole proprietorship. And in terms of business such a person who does business without formally creating a business organization is known as sole proprietor. A sole proprietorship is a type of company which is not legally bounded to be registered with the state as a limited liability company or as a corporation. It does not work as a separate legal entity and there are no legal formalities or any other licensing are necessary to create this business because it is not itself a legal entity or we called as a taxable entity. For this it is necessary to report income and expenses from the business on Schedule C of her or his personal federal income tax return. In generally a sole proprietorship gives the least protection because the personal liability of the owner of this business is generally unlimited. In this case both the business assets and the personal assets of the sole proprietor are subject to claims of the sole proprietorship's creditors. For working capital, this business is generally limited to the individual funds of the sole proprietor, and with the loans from outsiders willing to provide extra capital. In this business the owner himself is also personally responsible for all debts and liabilities incurred by the business, and the time duration for this business are not fixed like a sole proprietor can own the business for any duration of time and sell it when he or she sees fit. Like the owner, a sole proprietor can even pass a business down to his or her heirs by his or her own wish. In sole proprietorship, there are no specific business taxes paid by the company. During the lifetime of this person, a sole proprietor can sell or give away any asset because the business is not legally separate from the sole proprietor. In the case of death of the sole proprietor, the business is automatically dissolved. However, as this business is not a separate legal entity, it eventually finished when the sole proprietor becomes disabled, retires, or dies. So because of this, a sole proprietorship lacks business continuity and does not have a perpetual existence as does a corporation or any other business such as partnership.

Advantages of a Sole Proprietorship

The owner of this business has complete control and decision-making power over the business.

The sole proprietor owns all and risks all. The entire profit of this business goes to his pocket, so this motivates the proprietor to put his heart and soul in the business to earn more and more profit.

The secrecy is all time good in this case, as each and every aspect of the business is looked after by the proprietor and the business secrets are known to him only.

As the sole proprietorship business is undertaken on a small scale so, if there any change is required in business operations, it is easy and quick to bring the changes by the owner easily without any interruption.

As it is not legally bounded to any of hard and fast rules so Sole proprietorship is the least regulated form of business. Laws which are regulated are almost negligible in its formation and in its day-to-day operation and dissolution.

This is not a taxable entity so No corporate tax payments.

The biggest advantage is that there is a Minimal legal cost to forming a sole proprietorship.

No requirements of licensing or anything needed in it just few formal business requirements.

In sole proprietorship No attorney is required for set up a business.

Like that of formation of this business, the dissolution of the sole proprietorship is also very easy. As we know that the proprietor is the supreme authority and only the owner of the business and no regulations are applicable for closure of the business he can dissolve his business any time he likes.

Disadvantages of a Sole Proprietorship

This business is not free from criticism; it might be suffered from limitations and other possibilities like this, because of its nature and scope of operations in which the owner operates his business.

Because of limited resources of this business, the financial resources of an individual are limited. The owner mainly finances his business from his own savings or borrows from friends or might be some financial institutions or relatives.

There exists a limited managerial capability as modern business requires updated managerial skills in each and every activity which involve in performing different tasks. And we cannot hope a single individual to possess all the managerial talents and expertise which are necessary to carry on a business efficiently.

Because of unlimited liability of the owner, the private properties of the proprietor are also at risk. When the business fails, then the private properties of the owner are utilized to pay off the business debts to overcome that hurdle as there is no other option.

Due to uncertainty of continuity the business is uncertain because the business may come to an end due to the incapacity or death of the proprietor.

As there is only one person who is liable for everything so all responsibilities and business decisions fall on the shoulders of the sole proprietor.

Normally Investors would not prefer usually to invest in sole proprietorships.

http://legal-dictionary.thefreedictionary.com/Sole+Proprietorship

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