Sole proprietor is the simplest form of company that is used to describe a person who works for their interest without having gone through any formal procedure to incorporate as a limited or unlimited company. The operation can be easily set up and started immediately. The owner of a sole trader business has full control over the business where the owner can decide how the business can be conducted. The sole proprietor trader has the authority to restructure and dissolve the business at their convenience.
This is a type of business that contains more personal risk rather than a limited liability company. As a sole trader, the business owner is responsible for all aspects of the business. For a sole proprietorship, it is not so easy to attract investors or external partners, which slows down the growth of the business. In terms of size, the business is quite small, but the amount of business from a single trader is very large compared to any other form of business.
A sole trader business can be set up easily. No formal procedure is required to start the operation, which can often start instantly. To establish a sole proprietorship, it is not required to present accounts or records at the company house.
A sole proprietorship differs from a limited partnership in the following ways:
If you are a sole trader, under the law, you are either the person working on your behalf or an individual who is self-employed and works for others as a single person or individual. But in the case of a limited liability company, the law expects that there will be another person working alongside you in the scope and power of a director of the company.
As a sole proprietorship, you are required to keep records of your business and submit your account details, but in the case of a limited company, you are expected to appoint an accountant and file annual or semi-annual accounts providing all information about your financial affairs. . If a Limited Liability Company goes bankrupt or liquidated, then it is the company that faces it, not the people who run the business. But in the event of bankruptcy or liquidation of a sole trader business, the owner will be responsible for any unpaid hardship or hardship.
Advantages of a sole proprietorship:
Easy to set up – Sole trader business is the simplest form business. You can set up your sole trade business easily. You can trade as you seek. No formal procedures are required and business can be started immediately.
Full control over your business: As a sole trader, you have full control over your business and can make any decision as per your suitability without consulting or asking permission from other partners.
Easy to change – a sole trader business can easily be converted into a limited company
Easy accounting maintenance: as a sole trader, you can keep all the records of your financial affairs
Personal services: To attract your customers, you can provide them with personalized service
Disadvantages of a sole trade business:
1) Business with higher personal risk
2) Difficulty attracting strangers
3) You may find it difficult to attract outside investment