Small Business: 5 Advantages of a Sole Proprietorship

Most people starting a small business do not sit back and decide whether to incorporate or take a partner. The owner usually starts the business as an offshoot of some hobby, interest, or opportunity. This is the birth of a sole proprietorship. Even if the owner chooses at some time to incorporate, it is often to protect personal assets from legal action. There are several good reasons that small businesses start and remain sole proprietorships throughout their existence.

Sole proprietorships are easy to start.

All that is required to start a sole proprietorship is to start doing something that brings in money. This can be selling a product, performing a service, or renting out space for others to use to live, store belongings, or work. The possibilities and opportunities are almost limitless. Not all are hugely profitable. If it is not your only source of income, it does not have to be. As soon as you make that first craft item and someone buys it, you are in business. Frequently, people start sole proprietorships without even meaning to start a business.

You retain complete control with a sole proprietorship.

Within legal limits, you can do whatever you want as the owner of your own business. You have the right to hire and fire employees. You can change what service you offer or product you sell on a whim. In a sole proprietorship, you can rent expensive office space or work from your kitchen as long as you do not violate zoning laws. As long as you stay correct with the IRS, you can do anything you want with the profits from your business without having to answer for it. You carry the business money in your right pocket, and your money your left pocket. If you want to switch them back and forth or take a daily payday, it is your prerogative.

Setting up a bank account can be done without having to get a federal ID number unless you hire employees.

Your social security number is good enough for almost all situations. Most employers that are sole proprietors find it easier to do their taxes with a federal ID, but it can be done without it. The bookkeeping can be as simple as maintaining your personal checkbook. You can make it more difficult if you want or need to for business growth.

The size of the business can be limited so that you can manage it easier.

While most business owners are going for size, many find it just as profitable and rewarding to stay within a certain size range. It gives them a good income without the problems of growing larger. This is especially true for sole proprietorships where the owner is the only employee. Some examples are a small barbershop or beauty parlor. Having only yourself to account to keeps many of the headaches away from business ownership.

When you have earned enough money or grow tired of the business, you can just stop.

Since you are the owner and often only employee, it is your call whether the business will continue or end as long as it is solvent. Many sole proprietorships end when the owner finds a better opportunity by working for someone else. You also can have the chance of selling the business at some point for a nice profit to a competitor or someone who wants a ready made business. This is always a good option if it presents itself. You can live on the money or look to start a new company in another field or area.