New economic pressures and the demands of a flat but competitive world have inspired people across the globe to create their own businesses. From computers to social media to sandwiches and clothing, individuals have transformed their lives with entrepreneurship. However, when it comes to forming a business plan it helps to have a solid objective before launching into the market. One of the essential components of a business is the structure. Businesses come in various forms, all with strengths and weaknesses, and the structure can be decided as early as the funding stage. Corporations are their own legal entities, capable of being sued in the place of the founder or current administration. Partnerships have the benefit of doubling the minds and resources behind the business but puts both partners at risk of the other’s actions. Companies that receive heavy funding from investors find themselves giving stock, or in other words, partial ownership, to these investors. One of the most prominent business structures among individuals striving for personal and financial growth is the sole proprietorship.
This business model is noted for its simplicity and control as the entire business is owned by a single individual. In many areas it isn’t even required to register the business, though this differs from region to region. Chances are that many people already have a sole proprietorship. In 2008, 22.6 million sole proprietorships were in the United States alone. Selling cakes from outside one’s home to providing computer repair services and math lessons can qualify as a sole proprietorship. Performing business activities is the only requirement for qualification. Local laws may ask for registration and even a business name or the owner’s name, but the ease of setup is one of the greatest advantages to this model. Checking with small business administrations in the city is highly recommended for all potential owners. Why create an llc we wrote here
With the power to create a business with such ease, it’s easy to see the prospects for many potential owners. Complete control and the freedom to form your own business plan and change it makes this an attractive business structure. However, there are consequences for this amount of freedom. The owner of a sole proprietorship is liable for all of the business’s debts and actions. Unlike a corporation, the owner and business are indistinguishable. An owner must pay off the business’s debts and tax it appropriately. As a single individual, it is harder to obtain bank loans due to reliability issues. Licenses and permits are still required for specific business activities. If the business is sued, the owner is sued. Selling interests, like equity, to fund the business is also removed. With complete control comes complete liability and build up.
A sole proprietorship can be inexpensive and as instant in creation as the decision to form one. The boundaries between personal and business, formality and informality are up to the whims of the owner. As the self-hired employee, an owner isn’t forced by law to pay an unemployment tax or cover required legal payments. Policy and process changes can occur at any moment. Liability also means that an owner can personally ensure quality and proper maintenance. Further support of the business comes in simple procedures such as a business account at a bank, easy to understand tax forms, and the ability to mix personal and business money together.
A successful sole proprietorship has the potential to grow into a larger business structure as well while other businesses may be trapped in their structures perpetually. The two common structures are limited liability companies and corporations, expanding the market presence of the business and allowing it to grow further. Sole proprietorships provide an easy and powerful way for people to take charge of their life and expand their reach in the market. Not only serving as a status, it can lead to personal fulfillment and the opportunity to build a business built around the desires of its owners, giving them an vast level of freedom and control as they enter the market.
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