Sole Proprietorship: Definition, Pros and Cons, And Examples
A company is different from a sole proprietorship. The definition of it is a business that is not a company and is owned by one person. We may say that the business is not separate from the owner. This is the most basic of the business concepts based on corporate finance experts. Many businessmen use the concept due to easier legal affairs. If you are interested in knowing more, you can read our explanation until you are done.
The Definition of This Concept
We have briefly explained the meaning of sole proprietorship in a business. We may say that most of the sellers also run this business concept. This business concept allows the owner to manage the whole profit for personal needs or business development. Most of these types of businesses are run by freelancers and traders. This type of business is not subject to complex regulations as they apply to companies. We can say that the concept is different from Limited Liability partnerships (LLP) and Limited Liability Companies (LLC). However, you should learn about the pros and cons of sole proprietorship before using the concept.
Pros and Cons of the Business Concept
There are many advantages to this business concept, such as free financial management. The next benefit is the low cost of maintenance and creation. In fact, traders can obtain tax benefits, especially tax deductions. The tax deduction helps the owner save some money. This concept also provides convenience in managing taxes. However, the tax on individual income is not as complicated as calculating the tax that must be paid by a company.
After we explain the good effects of using the business concept, you should learn about the demerits too. The weakness of this concept is that the owner bears all kinds of losses himself. So for owners who are in debt, they have to bear the debt themselves until it is repaid. It is also possible that the owner has difficulty developing the business because a lot of money is used for personal gain.
Example of This Business Concept
Then, we are going to explain an example of this business concept. The examples of sole propertyorship are:
1. Consultant
Almost all types of fields have their own problems, so many people need consultants. Each consultant will receive a payment that goes into their personal pocket. For example, if a private legal consultant successfully handles client problems, the payment that the consultant receives is included in personal income.
2. Personal Teacher
Personal teachers who do not work for a company or agency are also included in a sole proprietorship. All money received from imparting knowledge to students fully belongs to the personal teacher. If you have expertise in any skills, you can be a personal teacher and find your student by yourself.
Now, you already understand this business concept. You can decide to use this concept when starting a business from scratch. The capital you spend will not be as big as when you set up the company. You will not confuse to understand about legal law to make company too.
