+91 8788091087 info@herambindia.com

Advantages and disadvantages of Sole Proprietorship


Advantages and disadvantages of Sole Proprietorship

Registration of a business name for a sole proprietor is generally uncomplicated unless it involves the selection of a name that is fictitious, or “assumed”. The business owner is required to register with the appropriate local authorities, who will determine that the name submitted is not duplicated by another business entity. Furthermore, the business owner must complete a form submitted to the governing authority to acquire title as a “DBA” or "doing business as”. The authority in some US states is the Secretary of State.

The license for a sole proprietary business entitles the owner to hire employees and enlist the services of independent consultants. Although an employee or consultant may be requested by the owner to complete a specific project or participate in the company's decision-making process, their contribution to the project or decision is considered a recommendation under the law. Under the legal doctrine Respondent superior (Latin: "let the master answer"), the legal liability for any business decision arising from such a contribution remains upon the owner and cannot be renounced or apportioned.

This is transposed by the unlimited liability attached to a sole proprietary business. The owner carries the financial responsibility for all debts and/or losses suffered by the business, to the extent of using personal or other assets to discharge any outstanding liabilities. The owner is exclusively liable for all business activities conducted by the sole proprietorship and accordingly, entitled to full control and all earnings associated with it. The general aspect according to the general business law is that this type of business owner does not embody a “legal entity” Furthermore, any attempted and unreliable distinctions of the business do not change the classification under this title.

The advantages of a sole proprietorship include:

  • Owners can establish a sole proprietorship instantly, easily and inexpensively.
  • Sole proprietorships carry little, if any, ongoing formalities.
  • A sole proprietor need not pay unemployment tax on himself or herself (although he or she must pay unemployment tax on employees).
  • Owners may freely mix business or personal assets.

The disadvantages of a sole proprietorship include:

  • Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
  • Owners cannot raise capital by selling an interest in the business.
  • Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.

 


POPULAR POST
Private ltd company Registration Fees
21 July, 2018

CATEGORY
ANI Business standard ibtn9 newdelhitimes outlook yahoonews
CALL