Advantages and disadvantages of having a business as a sole proprietorship Essay
Advantages and disadvantages of having a business as a sole proprietorship, 499 words essay example
A sole proprietorship is a simple sort of business structure which is operated and owned by the same individual that responsible for all business transactions. The owner can employ any number of people to help run the business. A sole proprietorship can run the business for any duration of time and sell it whenever he wants. The owner of sole proprietorship also can pass his business to his beneficiary. ( Levenson,J , 2016)
There are many advantage to start a business as a sole proprietorship. One of the advantage is the owner can control over the business decision and making power over the business. Since you are the boss of the business, you are entitled to all the profits made by the business. The owner can make the decisions without others opinion.
Besides that, sole proprietorship do not require double taxation as there are no taxes being charged to the business. The owner do not need to prepare separate tax return for the business because the owners only have to report the business income on their personal tax returns and pay income tax.
Operating and establishing sole proprietorship is easy for those who wants to start a new business. An individual can start a new business in a minimum costs because he only need to register his name and secure local license, and he is ready to start the business. This allow a person to set up a new business quickly and in a lower costs.
Another advantage of sole proprietorship is the owner receive 100% of the profits and do not splits it with others. He or she can choose whether want to reinvest the money into his business to expand the company, use it for personal matter or even can start another type of business.
However, sole proprietorship has its own disadvantage which may burden them in long term. One of the disadvantage is unlimited liability. The owner of a sole proprietorship is fully responsible for all actions and debts of the company. Growth potential is very limited for sole proprietorship because it is hard to find outside investors to fund sole proprietorship. Therefore, any debts must be paid by the owner using personal assets including his home.
Besides that, there are limited expertise and growth potential for a sole proprietorship. Since the business is owned and run by one person, the owner has limited expertise to cover marketing, accounting, delivery and product and service development. This lack of expertise may limit the growth of the business without adding more manpower.
Sole proprietorship also has a limited life expectancy. The life of the business is limited to the owner's lifespan whether the owner suffer from illness or death. Eventhough sole proprietorship can be easily transferred to their heirs, they often hard to sustain as the new owners lack of knowledge to run the business. Since most of the customer are loyal to the original owners because of trust and not the business, therefore they will lose the customer as well.