Disadvantages of Sole Proprietorship Businesses

Jesse
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Disadvantages of Sole Proprietorship:

Well, as there are advantages of owning your own sole proprietorship business, there are also disadvantages. My previous post stated the main advantages of having a sole proprietorship. So now, let us discuss some of the main disadvantages.

1. Some people want their business to continue on, even if something was to randomly happen to them. As we all know, life takes mysterious turns when least expected. In a sole proprietorship business, if the owner of the entity dies, so does the business.

2. As a sole proprietor, you do have the ability to borrow funds. However, since you are a sole proprietor, the funds that will be available for you to borrow can be limited. This is because in sole proprietorship's, unlike other types of businesses, the amount you can borrow is fully limited based on the owner's personal finances. A lot of times, when people are starting their own business from scratch, they might not exactly have the best credit or finances. This can be a major draw back in owning a sole proprietor type of business.

3. Seeing how a sole proprietorship business is not a type of partnership or corporation, all legal issues that the business faces are direct to and only to the owner of the business. For a lot of people, this one thing turns them off the idea of starting up a sole proprietorship. But let's be honest, if you're having fear of legal problems before your business has even started, it's most likely not an ethical idea.

4. Another disadvantage is the fact that benefits such as health care premiums are not fully deductible from your taxes. In other words, you will NOT get reimbursed for all your health care costs that are associated with your business. That's just the way it is.

Now that I've laid out some basic disadvantages of owning a sole proprietorship business, hopefully you can piece the two posts, this and the previous one, together to figure out if a sole proprietorship is the right type of business for you.

Weigh out the advantages and disadvantages, which one seems to come on top for you?
Hope this helps some of you inspiring entrepreneurs out there!


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Advantages of Sole Proprietorship Businesses

Jesse
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Sole Proprietorship Advantages:

So, many of you out there might be considering on opening up your own sole proprietorship type business. With any type of business you start out, there will be advantages and disadvantages. So let us go over the basic advantages of this particular business, sole proprietorship.

1. You are your own boss. Always and forever. What exactly does this mean? You call the shots when it comes to decision making in your business. If something succeeds, you can credit yourself and pat yourself on the back. At the same time though, if you fail at something, the blame is on no one else other than yourself. Also with you being your own boss, you get to choose your hours. That's particularly one of my favorite parts of being my own boss!

2. Sole proprietorship's are the least expensive business to set up. That's right! Not only are the least expensive type of business that you could start up, but it's also the easiest regarding things such as paper work and taxes.

Keep in mind, all profits you earn from a sole proprietorship business are yours. Therefore, you'll need to file those profits on your normal tax form every year.

3. Since you're the complete owner of your business in a sole proprietorship, all the money you earn goes directly to you. No one else! How great does that sound? It's like music to my ears at least. Keep in mind, however, if you have employees that you've hired then there will be a cut in your profits. The cool part however though is with the money you earn from your business, you can do what you please with it. My tip of advise would be to reinvest it into the business as long as sales/services are doing well for you.

4. Last but not least, another great advantage of a sole proprietorship business is the fact that you can pretty much quit the business when you please. There are certain things you'll need to do in order to completely disband your business all together. However, this type of business is the easiest to do so if things "just aren't working out for you."

The next post I'm going to spiel out the main disadvantages of owning a sole proprietorship business. As I've said earlier, all businesses have their advantages and disadvantages. You have to outweigh them yourselves to decide which is truly the best type of business for you and your needs!

Stay tuned!


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