What Should You Know Before Starting A Sole Proprietorship?

If you’re thinking about starting a business, you know there are multiple business structures for you to choose from. This is why you may be interested in starting a sole proprietorship. This is a good move, but there is a couple of things you may not be aware of. Below, we’ll run through them, so keep reading.

You Can Still Have Employees

When people think about sole proprietorship, they think it’s just you working from home. This is wrong as you can have employees under you. The only difference is that the number of employees you’ll have would be very low.

You Won’t Have That Much Paper Work

At the end of the day, sole proprietors have very few things to document. They don’t have to experience a harsh registration process as governments know it’s just them working from home. This means you’ll be saving a lot of time.

This is great, but if you decide to have employees, the taxes you’ll have to pay would be complicated. It can be a headache to work your head around, which is why you’d need the help of a business lawyer.

As there are less taxes and documents for you to do, your life is easier, but you’ll still have to charge GST and look for a GST calculator.

You’re Going to Be Legally Liable

One of the biggest downfalls of sole proprietorships is the fact that you’re legally liable for everything. This means if anything were to happen to your business, your personal assets would be seized. This is extremely dangerous and as you’re going to be a small business, so your chances of overreaching and falling into debt are huge.

You don’t have to face such a thing with any other business structure, thankfully. So, what do you think?

You’re Going to Save Money

As you’re not paying a myriad of taxes, and you’re running everything yourself (for the most part), you’ll be saving a lot of money if you decide to start a sole proprietorship. The money you save would be immense, and could be used to further your business’ growth.  

You Can’t Sell Stocks

Although saving on taxes would help with capital, you’d get way more cash by selling stocks. This is how corporations make a lot of their money, which is how they grow. Unfortunately, you can’t sell stocks. In a way, it’s a huge disadvantage as if you’re ever strapped for cash, your only choice would be to speak to a lender, which isn’t something you’d want to do.

You Can’t Speak to A Lender

As mentioned, you’ll have to speak to a lender. The thing is, you’ll find it really hard to get a loan. Banks and finance houses aren’t fans of lending to sole proprietorship as you don’t run a fully formed entity, so your risky business.

As you see, there is a myriad of things that have to be kept in mind when deciding to form a sole proprietorship. So, what do you think?

Delsie Leff
 

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