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Pros And Cons Of Sole Proprietorship

doraemon By doraemon on
Badge: Publisher | Level: 10 | Workplace & Operations Expertise:
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Sole proprietorship is when an individual owns a business enterprise. He is the one who controls how it is run and often serves multiple functions for the enterprise. It is the simplest form of enterprise as it involves one owner and zero or more employees. Here are the advantages and disadvantages of such a setup.


1) No one to argue with - What you say goes since you are the boss. You don't answer to any partner or a board of directors. The buck stops with you.

2) All the profits go to you - All the money goes to you as a profit. You do not have to split this with anyone else.

3) Single taxation - You are not subject to double taxation like in the case of corporations.

4) Low startup costs - You can start up with low capital. There are many businesses you can start in your garage, kitchen or bedroom.


1) The business lives and dies with you - This is literal. The business lives so long as the owner lives. When the owner dies, the business dies as well unless it is assumed by someone else.

2) You assume all responsibility - When starting up the business on your own, you are the be all end all. You are the CEO, the secretary, the delivery man, the garbage man among others. With all this responsibility, in the beginning its all work and little pay.

3) You assume all the risk - All the eggs in the basket are yours and when the business goes bust, so do you.

4) Hard to get out of - If you invested a little and want to get out then it is easy, but if you have invested your life's savings or your retirement money and want to get out, then it becomes a tough decision. It is unlike if you owned shares of stock, you can sell them anytime and divest yourself.