While commencing a business, it is vital to land upon the right structure. Though there is no depth of business startups, most of the people are at ease with a sole proprietorship. Unlike partnerships, sole proprietorship revolves around one person who is responsible for all the decisions.
The list of its advantages is vast and varies. Let’s shed some light upon these perks that come up with this popular business arrangement:
- Minimum paperwork
Paperwork is the first and foremost hurdle in establishing a business. Some people just don’t feel comfortable going through a lot of documentation and have a reputation for messing up everything. Mainly first-timers are more likely to face a tough time filling up tons of papers.
However, being a sole proprietor, you can save yourself from this lengthy process. It also depends upon the scale of your business as well. So, if you are going to start a small company based on the model of a sole proprietorship, the paperwork will be even less.
Paperwork is not only required when you kickstart a business but also when you want to apply for its closure. Again, you will not be posed with challenging documentation. Moreover, shifting to another business structure can be done quite easily.
- Affordable startup costs
Forming sole proprietorship is typically cheap. The reason being, you don’t stand accountable for paying different government fees.
On the other hand, while doing a partnership, you will have to sign a partnership agreement to learn about the rights and duties of the partner. The agreement also comes into play when a dispute may arise between the two owners.
Apart from paying to the government, you will have to consider the legal costs as well. All prices combined; you will have to dedicate a decent budget in the beginning. Giving away a fair proportion of money upfront could be very unsettling.
- Complete authority
Some people are simply not meant to work under a boss. The best does not come out when an authoritative figure constantly influences such personalities. Quite the contrary, they find themselves a misfit in the workplace. A sole proprietorship is their cup of tea.
Besides, having a boss sometimes creates communication hurdles. There are times when you must decide on the spot without consulting with somebody else. And until you receive the green signal from your head, the water is already under the bridge. This fast-paced decision making, which is crucial in emergencies, is another powerful quality you get when you adopt sole proprietorship.
- Easy to file tax
After having the type of business ownership explained, you can conclude that as a sole proprietor, you are not obliged to pay taxes separately for your business. All you have to do is file a Schedule C tax form with IRS. On the other hand, being in a partnership, you are required to register for an employer identification number.
The losses and profits are divided and then subsequently reported to the IRS. This process is indeed time-consuming and diverts your attention from the business for some time. If taken help from a legal expert, there is every possibility that even your expenses can escalate significantly.
- Profit goes to one person
Often, it has been witnessed that the workload is not shared equally, even in equal partnerships. So, if you are doing more than the other partner to stabilize your business, at the end of the day, profit is going to be divided evenly.
That could be a huge turn off for anybody. And you refrain from putting your heart and soul into work next time. As a result, the business suffers and impacts your relationship with your partners.
Guess what, you are unlikely to confront any such scenario in the sole proprietorship. Admit it or not, money is one of the biggest motivations to work harder. And once you know all the perks and privileges are going to slide in your pockets, you will walk the extra mile to enhance the business.
Some business structures are bound to the public their business operations. However, since a sole proprietor does not sign any formal papers with government –either federal or state – he is free from making any public disclosure.
- Easy banking
Simplified banking is another standout advantage which is the byproduct of a sole proprietorship. This setup does not require any heel-dragging, and you can directly accept and send money through your personal bank account. All you are going to need is a business checking account, and you are good to go.
The last verdict
In the end, it is safe to say that sole proprietorship has tons of advantages. “Going it alone” does not make things any difficult for you. In fact, quite the contrary, sole proprietorship gives you more space and freedom to work innovatively.