What is sole proprietorship? It’s a type of business enterprise that is owned by one individual. One person is responsible for the entire business, and there is no legal difference between the owner and the business itself. If you’re going into business as a sole proprietor in California, you may need a California seller’s permit verification to openly sell your products.
That’s just one of the things to keep in mind when considering a sole proprietorship: You must be knowledgeable when it comes to a variety of topics, including sole proprietorship taxes, proper documentation, and permits, etc.
Yet, there are many advantages of sole proprietorship to consider. By taking a closer look at some sole proprietorship pros and cons, you can make a more informed decision on what business model is best for your future enterprise.
How Is a Sole Proprietorship Different from Other Business Models?
A sole proprietorship is by far the most popular type of enterprise, but it can also be confusing to fully understand. It’s owned by one person, and that person may even use their legal name as the name for the business.
The biggest difference is that there is no separate legal entity from the business and the person who runs it. The owner is in charge of all the assets and they reap all the benefits—but they also take on all the risks by themselves.
What Are the Advantages of Sole Proprietorship?
There are many benefits to enjoy when you set up a sole proprietorship instead of something like an LLC or bigger corporation. Some of the most notable advantages include:
What Are the Disadvantages of Sole Proprietorship?
While there are many benefits of a sole proprietorship, there are also some cons to consider. The biggest disadvantage is the risk you’re taking when you run a business by yourself. While you can enjoy the profits as they come, you’re also left to deal with all the losses if your business doesn’t succeed.
A sole proprietor doesn’t have protection from liability, as a larger corporation does. If your business is unable to pay off its debt, creditors may come after your personal belongings and assets.
Other notable disadvantages to keep in mind include:
Another disadvantage of being a sole proprietor is having to carry the burden of all the business decisions. For example, if you run a company that sells custom-made sneakers, it’s up to you to come up with the designs, price points, extra features, etc. There’s a good chance you might have talent and skills in some of those areas, but not all. As a result, your designs could start to become outdated. Or, you could be missing out on thinking of special features your customers would enjoy.
By not having other people to bounce ideas around with, you’re limited in your business view, which can end up hurting you in the long run.
Should I Start a Sole Proprietorship Business?
Starting a business on your own is always an exciting venture, but deciding which structure to follow can be confusing. Now that you’ve seen some of the pros and cons of starting a sole proprietorship, you can decide whether it’s the right option for you.
No matter what you decide, you shouldn’t have to stress over your business filing services. Contact us at FastFilings for seller permits and the business licensing required for the state of California. It’s the best way to start your new enterprise off on the right foot.