Opportunities of Sole Proprietorships

By Jeff Clements

A sole proprietorship is a simple form of business in which the owner is in business for himself as an individual without any business partners or corporate formalities. Sole proprietorships are not required to comply with complex organizational requirements during their formation or operation, and this simplicity is one of the main benefits of this type of business structure.

New Businesses

Starting a business as a sole proprietorship allows the owner to get a new business up and running quickly when compared with other, more formal business structures that either have state filing requirements or require certain documentation prior to starting operations. This can enable the sole proprietor to act quickly on business opportunities as they arise in the marketplace.

Startup Costs

Starting a business as a sole proprietorship allows the owner to start the business without incurring any upfront business formation costs such as filing fees or attorney services. This allows the owner to have more flexibility with the business plan because it increases the variety of business opportunities that sole proprietorships can reasonably pursue, and it also reduces the sole proprietor's cost of doing so.

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Avoid Unnecessary Complexity

Starting a business as a sole proprietorship allows the owner to avoid the complexities of running an independent business entity. This can be especially advantageous to a small business because the owner can focus instead on more critical matters such as business development and operations management. Since there is no business entity as in a partnership or corporation, everything in the business, including its assets and liabilities, are in the owner's name, and the business's revenue and expenses are reported on the owner's individual tax return.

Business Development

Starting a business as a sole proprietorship allows the owner to develop a new business and build up its value before looking for partners or deciding to incorporate. This provides a negotiating advantage with potential partners or shareholders in the future. Furthermore, structuring a new business as a sole proprietorship is an opportunity to scale the business up slowly without the pressure of meeting the expectations of others, such as partners and shareholders.

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An S Corporation Vs. a Partnership: Pros & Cons
 

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