A flexible and simple way to scale operations, sole proprietorship has several advantages but it comes with some risks and failures too. Famous names like JCPenney, eBay, Sears bring to mind millions of dollars in sales and lasting brand recognition, but these all have some points in common. If we have a look at the simple structure of the other businesses, then we come to know that sole proprietorship is simple to establish and inexpensive to produce. It is beneficial in the long term and the majority of the business owners prefer this type of business structure. Before discussing the benefits of this business structure, we need to know about a sole proprietorship.
What is a sole proprietorship?
It is a business structure linking the owner of the business to its organization. It is the simple kind of structure of the business and not a legal entity. This structure does not need federal registration to operate and the owner of the business is liable for all the business liabilities and debts. It includes workspaces, physical storefronts, established businesses, growing startups, creatives, individual freelancers and many others. The business owner is liable for the safety of workers, health, taxes, wages and others.
Benefits of the sole proprietorship
There are different business structures and all of them come with some pros and cons. Some of the benefits are here.
- Easy Formation and personal interest
It is simple to run and form. No legal formalities including registrations are needed to set it up and you need to submit the reports to the authorities about the business functions. However, there is a complex and long procedure for the formation of the stock company.
In this class of personal component, the business owner devotes complete energy and full time. He tries to know the tastes, fashions, and habits of his customers and he changes the policy of the company as per the conditions and market situations. In short, he is a whole sole in charge of the business. Therefore, he is responsible for everything.
- Secrecy and profit
In all the forms of business structures, the profit is shared with the other shareholders. No one can take the 100% profit or bear the loss of the company completely. In this form of business structure, the business owner is responsible for the loss and profit of the company.
Moreover, it is highly important to maintain the secrecy of your business and it is possible because no other person can share your business details. Therefore, you can keep your business details secret.
- Low Cost of starting and operation
The sole operations are to incur minor expenses for the commencement of this structure. There will be no advisory fee, attorney fee, registration expenses, legal charges and others. One person manages the business and does not pay operational expenses. The majority of the people prefer this structure of the business because they do not need to decide terms and conditions with others and it is easy to manage.
- Entire Control
The all-time favourite benefit and common reason of this business structure are that the business owner has complete control of the business overall his activities and assets. As soon as the business increases in size, there is no one with whom he needs to share the profit and business revenue. He is free to handle the business decisions and control the business without taking anyone’s suggestions. A business owner is independent and it is simple to manage all these things.
You can decide on hiring, terminating and paying your staff. What will be their gross wages? Pay stub is the other word for the gross wages. You can decide about it without anyone’s permission.
- Direct relationships
A business owner in a sole proprietorship contains a socially connected life and it is a vital factor for the business expansion. On one side, he maintains a direct relationship, assigns duties, manages staff with the workers to achieve the best results of his venture.
An entrepreneur is an entire sole in charge of the business since this business structure gives him unlimited authority. You are the sole owner if you work without any partner.
It doesn’t create a different business substance. It implies your business liabilities and resources are not isolated from your liabilities and individual resources. Around here structure, the sole proprietor is liable for the commitments and obligations of the business. As far as he might be concerned, here and there, it turns out to be difficult to fund-raise because the sole proprietor can’t sell stocks and banks wonder whether or not to offer credit to him