Pros and Cons of Sole Proprietorship – DookyWeb

Pros and Cons of Sole Proprietorship

A sole proprietorship is a single-member business that’s never formally incorporated with a state filing. Sole proprietorship pros and cons include that It’s easy to set up, but there’s no distinction between business and owner and no liability protection. Sole proprietorships minimize startup costs but won’t help you limit your personal liability.

Sole Proprietorship

Here in this article let us understand what are the Pros and Cons of registering a Proprietorship firm in India.

Pros of Sole Proprietorship

  • Easy to set up

A sole proprietorship is very easy to form, which most likely explains why it is the oldest type of business structure known to man. The creation of a sole proprietorship does not involve the formal creation of a business organization. It can be a one-man operation, where the sole proprietorship has only one employee, who also happens to be the owner.

  • Tax benefits

Sole proprietorships have the benefit of being subject to simpler taxation procedures since it is not a separate entity, it is not taxable. That does not mean, however, that it is completely free from having to pay taxes.

In a partnership or a corporation, the business entity will have to file its own tax return, and the owner-partners or stockholders have to file their own separate tax returns for the income that they received from the operations of the business.

  • No filing of returns

Sole proprietorships do not require annual reports or filings with the state in order to stay current. In fact, you don’t have to file anything other than your personal tax returns. Most of the companies are generally required to file annual reports after they’re formed. These reports typically require updating lists of members or managers.

  • Easy dissolution

It is as easy to cease all operations of a sole proprietorship as it was to set it up. Once the owner decides to stop running the business, he can easily do so. There is no need to undergo a lengthy process since the business does not have very formal registrations binding it.

Cons of Sole Proprietorship

  • Unlimited personal liability

If you’re a sole proprietor, you don’t have any of the limited liability protection offered in an LLP, LLC, etc. You are personally liable for all business expenses and debts, if someone’s hurt on your property, or is harmed by a product of your business or a mistake you make. This means that there is no legal difference between you and your business.

  • Business life may not last long

If you structure your business as an LLP and anything happens to you (like death or a planned exit), the business survives. In fact, as long as you keep your business filings current and maintain proper licensing, your business can survive in perpetuity. If you’re a sole proprietor and something happens to you, however, that’s the end of the business.

  • Raising capital is difficult

Structuring your business as a sole proprietorship is not a good idea if you may need to raise money from outside investors. This is because there’s no real business to sell, so it’s almost impossible to raise money unless you have tangible assets or intellectual property that investors can buy into.

Here in this article, we have understood the Pros and Cons of a Sole Proprietorship firm registration in India, it will surely be useful for you to grow your business. If you’re wondering for Sole proprietorship company incorporation then you should visit the Online Sole proprietorship registration portal. Further business accounting needs can be taken care of by EZOTO Software – By Downloading this gst invoice app you would be able to manage invoice, accounting, credit, inventory, customers, etc and fulfill all your accounting needs.