Sole proprietorships: advantages and disadvantages

The sole proprietorship is one of several types of businesses that have been around for several millennia. It has been successfully practiced by individuals due to the ease of setting it up and due to the minimal financial requirement in most cases. This type of business is the largest employer of labor in almost every part of the world.

Most of the corporations and public liability companies we have today started out as sole proprietorships and then transitioned as they grew and the financial demand became too high for one person to easily cope with. There are so many people out there who have so successfully run their personal businesses and turned them into a brand.

What is sole proprietorship?

A sole proprietorship is a business that is owned and managed by a single person. The individual makes decisions alone, conducts all forms of financial transactions, and controls all aspects of the business without consulting anyone. It is usually referred to as a one man business or a one man show.

Advantages of sole proprietorships

There are several advantages that the sole proprietorship enjoys; And these advantages make it easier for people to run and feel comfortable with the business. Some of the advantages include the following:

1. Minimum financial requirement: Most retail stores, business centers, restaurants, hair salons, etc. The ones you see out there are examples of sole proprietorship businesses and do not require a large financial base to set up. Almost anyone can establish one form of sole proprietorship or another because only a minimal amount of money is required to do so.

2. Decision making: The sole proprietorship makes their business decisions on their own without having to go through any vetoes or scrutiny. As a result, decision-making is faster than in most partnerships and public liability companies, where annual general meetings are needed to reach a major decision.

3. Corporation tax exemption: The business owner does not pay a corporate tax on his business; instead, his business is charged at the personal income tax rate, saving him more money in the long run.

4. Legal cost: The legal cost of setting up a sole proprietorship is usually minimal, as most economies encourage individuals to set up their own businesses without going through rigorous legal processes.

Disadvantages of sole proprietorship

Having seen the advantages of a one man business, it would also be wise for us to talk about the disadvantages of this type of business. So what are the disadvantages of sole proprietorship?

Yo. Continuity: One of the main problems of this type of business is the lack of continuity. In the event of the owner’s death, this could be the end of the business, as anyone else hardly has in-depth knowledge of the business. Since the owner took over everything while he was alive, it is difficult for someone else to successfully run the business after his death, due to a poor delivery system.

ii. Responsibility: In the event of business bankruptcy, the sole proprietorship is obligated to pay the obligations of the business. He has to pay off debts, mortgages, etc. that the business incurred. In this case, he could be left with nothing after selling the commercial properties to pay off the debts. In some cases, he ends up in jail for not being able to fully pay the debts. In addition, the sole proprietorship could be sued for violations committed by his or her personal employees, unlike in tort corporations where owners are not liable for violations by employees.

iii. Expansion: Sole proprietorship is not a good investment attraction for people who have the money to invest, since the business is run by one person. This makes it difficult for the business to expand significantly.

IV. Bad decision: There is a saying that “two good heads are better than one”. A bad decision by the sole proprietor could easily run the business aground. This is so because his decisions are not examined by a third party before they are finally approved.

v. Lack of specialization: The sole proprietor is a “jack of all trades” and usually a “master of none.” Since one man runs all aspects of the business, it is difficult to develop any form of specialization, unlike in societies where there is division of labor and specialization. The sole proprietor could be the CEO, manager, secretary, accountant, and messenger all at the same time.


The sole proprietorship has its own advantages and disadvantages. Before making a decision on what type of business to start, you need to weigh both sides of the coin. If the advantages outweigh the disadvantages in your own opinion, then it would be a good adventure to undertake.

I’m sure there are still other things to talk about when it comes to this topic. Please share your own opinion with us. Do you think sole proprietorship is a good business to get into? If so, why think so? And if No, why do you also think so? Remember to share this with your friends.

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