List of Pros and Cons of Sole Proprietorship
The idea of owning your own company or freelance working is desirable to so many people. There really is no one to answer to (other than the Government or angry clients) and you get to call all the shots. However, is being a sole proprietor the right move for everyone? In the following article we discuss some of the pros and cons to sole proprietorship.
The Pros of Sole Proprietorship
The simplest form of business for someone who wants to own and run a company is the sole proprietorship. The only thing you really need to do is file all the paperwork to get your company established and running and then launching (don’t forget insurance if you are required to have it!). Once you have paperwork out of the way, you can get off the ground.
The workload that you have to produce is a lot less than if you had partners in a company. You have less to file in taxes, less employment paperwork to keep on top of, and easier time for organization of what paperwork you do find or have to do.
The good thing about taxes when you are a sole proprietorship is that the government sees sole proprietorships the same as an individual. This means that you can consider all of the income as personal income. Neat right? Just keep track of your business income and your businesses expenses for your Schedule C form.
The Cons of Sole Proprietorship
One of the largest setbacks to being a sole proprietorship is that there is no one to answer for liabilities except you. This is when there is no distinction between you and your company being held liable for something because you are the only person of the company. This is why liability insurance is essential (even if you don’t think you need it, it is always better to be safe than sorry!)
2. Business Contacts
Many larger companies and corporations prefer working with companies that are comparable in size. This means that it is harder for a sole proprietorship to gain the respect and business of larger corporations. Sometimes a partnership may be better when trying to get business or maintain it.
If you limit yourself to being a sole proprietorship, then you may be limiting ever expanding your company. If you want to expand, it often means that you need someone to run a company, you will need more employees and being a sole proprietorship all you have is you. Consider your options carefully.
Which is right for you? Lay out all of your pros and cons that you can think of in addition to the key ones that we have mentioned here and you may find that it is still the right choice for you, but you may also find that a partnership could be the right road.