Advantages and Disadvantages of Sole Proprietorship

Posted by Enterslice India on December 28th, 2018

Sole Proprietorship gives the person the liberty of taking decisions alone, to spend and invest the amount of profit alone. They are not required to share the profit with anyone.

But in initial stages, the sole owners become anxious and have various doubts regarding business’ success. Many questions arise in their mind such as how long it would take to make it on their own, how they would be able to manage everything alone and more which is quite to fine to an extent.

It is very difficult to do things all alone and without proper guidance. But now, you don’t need to worry anymore. Just continue with this blog, and you will get to know how Sole Proprietorship Registration can result beneficial in starting your business all alone.

Sole Proprietorship is a business structure that requires a single owner to regulate and manage the same. It’s neither a company nor a corporation, but it’s a business which is owned by an individual which makes it easier to keep a track on ongoing activities.

One can sell products under sole proprietorship through Sole Proprietorship Registration and can avail a plethora of benefits from the same.

What is a Sole Proprietorship Registration?

Well, in India, there’s no formal procedure to register a sole proprietorship because it is considered as an extension of the Proprietor. A Sole Proprietorship Registration could be done under the GST Act or MSME Act. And, for the registration, only a few basic things are required such as PAN number of the Proprietor, certain licenses, and capital to run the business.

To establish a Sole Proprietorship business, you need to open a bank account in the name of the proprietorship firm or obtain licenses to conduct the business.

Advantages of Sole Proprietorship Registration

While many of you may think that starting a business single-handed isn’t a piece of cake, let me tell you that it isn’t even that much daunting as you think. Yes, there are a few challenges with it, but a Sole Proprietorship Registration has much to offer you. Below you can find various advantages of Sole Proprietorship Registration and decide how you can benefit from it.

• Easy to start

Since there’s no requirement of any specific registration for a sole proprietorship business, so it’s quite easy to start the business with just a legal identity of the proprietor. A PAN and Aadhaar are sufficient to obtain the Udyog Aadhaar registration and Trademark Registration to protect the identity of the business.

• Easy to operate

Being a single owner, you would be accountable for taking every decision and implement them in the business. Taking other’s opinion or approval isn’t mandatory; therefore, therefore, soleproprietorship registration gives you the facility to run the business the way you want.

• Sole Beneficiary in profits

Whatever profits your business is getting, you’re the sole beneficiary of that because you’re the only owner of the business. Unlike, other businesses (excluding One Person Limited Company), the profit isn’t shared with anybody else.

• Minimum compliance

Because a sole proprietorship business isn’t registered with any government body, therefore, there are a very few compliances. You would have to answer the government only on tax registrations and you will require filing your compliance annually.

• Tax Benefits

As a sole business owner, you won’t require to file a separate business tax report. Instead, you can list business information and figures within your individual tax return.

• Less Expensive

Don’t confuse Sole Proprietorship with One Person Company. Sole proprietorship registration is pretty inexpensive when compared to One Person Company. Not only in the beginning but later too, can you save a lot of money in this kind of business. For example, you can hire fewer employees and can save money here.

Disadvantages of Sole Proprietorship Registration

Well, you can’t deny the fact that every coin has two phases. If something has its good side, then there must be its negative side as well. And sole proprietorship is no exception. Let’s find out what disadvantages sole proprietorship businesses hold-

• Infinite liability

Yes, it’s one of the most disturbing aspects of a sole proprietorship business. Because there’s a single owner who is accountable for everything, so any loss, be it small or big, the owner is supposed to meet them at any cost. If liabilities are not met, then their personal assets can be taken.

• Difficult to obtain funds

A sole proprietor cannot splurge into the sale of business interests or shares, and since its existence is tied to the proprietor, therefore, banks wary to give large funds to sole proprietorship firms.

• Takeaway

Although the Sole Proprietorship firms have a few disadvantages, they are overshadowed by the advantages that they offer. Therefore, with a proper guidance, a sole proprietorship can result as an effective business.