Running your own business can be wonderful and intimidating at the same time. When your business is just getting off the ground, you might have partners or other investors on board. Whether it’s a year old or not, starting a small business should be something you can take pride in. The question is, should you take sole proprietorship of the company? Let’s find out.
A Quick Overview
First of all, it’s worth it to know a little bit more about what sole proprietorship means. By definition, a sole proprietor is someone who owns and operates a business by themselves. Since they run the company alone, they have complete control over the destiny of the company.
Easy to do: Unlike other business structures, sole proprietorships are the easiest to start. Forming and managing the proprietorship is simplified, and they don’t call for as much financial investment. Starting up a corporation or LLC is much more complicated than this. Register your company and get the licenses and permits you need.
Gives you more control: You’re the boss and the decision-maker. You can run the business as you see fit.
Easier tax prep: No one likes paying taxes, but they are a fundamental part of keeping a small business going. Your proprietorship income is taxed as personal income.
Much less paperwork: There isn’t much paperwork to worry about; likewise, legal formalities become a snap.
You take on personal liability: Unfortunately, there are some notable cons as well. You are held liable for all debts and obligations. This could expose you to creditors who will come after your personal assets.
Harder to accrue capital: Capital and seed money are essential components of any small business. Banks and lenders are going to be reluctant to extend loans or grant funding. You’ve got to prove you can meet deadlines and repay all of your loans.
You have more responsibility: Once you become a sole proprietor, you are responsible for making all of the business decisions. This also means that you need to manage the books, handle the taxes, and oversee the day to day operations. You could get burned out very quickly – maybe a partnership is a better approach.
Limited room for growth: Finally, consider how there is limited room for growth in a sole proprietorship. Let’s say that in a few years you feel ready to expand. Finding partners and other investors might not be hard – but you’ll need to change your business structure first.
trust the professionals at the harding group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for emails or phone calls and will strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. We serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.