Advantages of the Sole Proprietorship

The sole proprietorship is a business structure for a firm that is owned and operated by one person. So, if you are the only owner of the business or didn’t have partner, then your business is called as sole proprietorship.

Every kind of business structure has different advantages. For sole proprietorship, because you are the only owner and operated the business then you have fewer formalities and legal restriction will get fast approval to obtain business license.

Because you have no partner, then you have complete control for the business. You can do anything that you want because you didn’t have responsibility to other people. There is no other boss, except your customers. And the most obvious benefits is you are not required to share profits with anyone.

Partnership

Partnership is formed to conduct a business with two or more partners being fully involved in the operation of business for profit. The partners contribute money, property, or services to the partnership; in return, they receive a share of the profits. The two most common partnership types are general and limited partnership.

No written partnership agreement is necessary, though it’s a good idea to make one. A partnership can arise even though there is no express agreement and the parties do not call themselves partners. Without question, a carefully prepared written agreement spelling out the rights and duties of the partners is highly recommended. A partnership agreement could be helpful in solving any disputes. There are some more advantages and disadvantages to the partnership.

Advantages of partnership:

  • They’re easy to form
  • More sources of capital
  • Liability may be spread among the partners
  • Sharing emotional burden

Disadvantages of partnership:

  • Friction between partners
  • Lack of continuity

Sole proprietorship

A sole proprietorship is the easiest, least expensive, and least regulated business legal structure. A sole proprietorship is simply a business that is owned by one person. If you go into business for yourself and do not have any partners, you are considered a sole proprietor. The proprietor personally owns all of the assets of the business and controls its operations.

To establish a sole proprietorship, all you need to do is name the business, get a business license from your city or county, publish a fictitious business name statement in a local newspaper, open a checking account, open your doors, and you are, quite literally, in business.

Advantages of the sole proprietorship:

  • Low start-up cost
  • Ease of formation and running more quickly than with other structures
  • You have total ownership and control of the business
  • You don’t have to share profits with anyone

Disadvantages of the sole proprietorship:

  • Difficulty in raising capital
  • Unlimited liability. The owner of a sole proprietorship is personally responsible for all business debts, obligations, and judgments of the business
  • You must pay self-employment tax on the business net income