Sole Proprietorship

Sole Proprietorship

A business owned by a single owner, referred to as the sole proprietor.

Benefits of Sole Proprietorship

Includes full ownership of profits, ease of formation and dissolution, lack of legal constraints, tax savings, personal interest of the owner, freedom of decision-making, secrecy, high credit standing, and low costs.

Unlimited Liability

In a sole proprietorship, the owner is personally liable for all business debts, risking personal assets.

Ease of Formation

A sole proprietorship can be established easily without government registration processes.

Tax Savings

Sole proprietors are only taxed once on their income, unlike companies which face double taxation.

Lack of Employment Opportunities

Sole proprietorships typically do not offer career prospects due to their limited size.

Secrecy in Sole Proprietorship

Financial affairs and accounts do not need to be disclosed to shareholders, unlike in companies.

High Credit Standing

The sole proprietorship enjoys a strong credit position as personal assets can support business debts.

Difficulties in Management

Due to limited resources, a sole proprietor may face challenges in hiring qualified management staff.

No Longevity

The life of a sole proprietorship ends with the death of the owner, leading to business uncertainty.

Partnership

A business owned by two or more individuals who share profits and responsibilities.

Limited SIze

Business does not grow to high level due to lack of capital and highly qualified staff unlike a company that grows in size.

Personal Interest

Owner takes personal interest and offers maximum of is services for growth of business.

Corporation

A legal entity that is separate from its owners, providing limited liability protection and allowing ownership transfer through shares.

Freedom

Owner can do whatever he wants without the concern for another. (No pressure)

Low cost

Formation and dissolution of business is quick. It also does not need heavy expenditure or capital.

Minimum Legal Constraints

Companies and partnerships have to follow many laws, and regulations to run their business. Sole proprietorship is exempted from these.

Complete ownership

Sole owner owns all the profits the business earns.

Ease of dissolution

No court of law needed to liquidate the ‘company’. Sole proprietor can easily and quickly dissolve his business.