Sole Proprietorships

As the name suggests, a sole proprietorship is a business owned by one person. Decisions on all business matters, legal matters and tax matters are the sole responsibility of this person, the business owner.

Many small businesses start out as sole proprietorships, owners who write their own business plan, dig into their own pockets or the pockets of willing friends and family for their start-up capital, and try to chart their own way in the business world.

Advantages of Sole Proprietorship

There are some significant advantages to a sole proprietorship, including the autonomy that comes from owning your own business. Owning a business is the reason many people choose to leave well-paying jobs where they have been employees for someone else. For many, owning a business is the great American dream. Immigrants come to this country with the hopes of owning businesses. For many business owners just knowing the profits from their own sweat will be returned to them is advantage enough.

Disadvantages of Sole Proprietorship

There are just as many disadvantages to sole ownership, depending upon how one chooses to look at the bigger picture. Yes, a sole business owner is responsible for income taxes—a number of different government reports—hiring employees, insuring them, paying into Social Security, keeping good records, and attending to future business planning. The business is an organic project. As times change, locations change, neighborhoods and economies change, so should small business. But once again, many business owners might see these as important responsibilities that are to their advantage.

Mom and Pop Businesses

The so-called “Mom and Pop” business, or the family business, is often a sole proprietorship. These businesses can have their own attendant host of issues. Most families are negligent when it comes to devising legal terms of ownership, partnership and dispersal of income. Neglecting these things can lead to conflicts that are the most likely disadvantage to family businesses.

To avoid the rut of family business, make sure your business associates—your family—understand who the business owner is and who the employees are in the scheme of family ties. Employees, even though they are family, should be paid in the same manner as any non-family employees the business might hire.

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