Celebrated for its limited ongoing formalities, a sole proprietorship business is advantageous in many ways. If a person independently owns a business and handles the operation, it is regarded as a proprietorship firm. This type of business whether it is a product based business or a service based business is considered as an extension of the owner rather than as a separate legal entity. It includes all the other owner income sources while filling an injury line. The sole proprietorship is globally considered as the simplest form of business as it refers the person who has raised it with the investment of a guaranteed business loan.
The Positives of a Proprietorship Business:
1. One owner, one direction
2. The owner has complete control in decision-making management
3. A proprietorship firm has less controversy in policy-making
4. The income of owner is directly linked to the success or failure of business
5. It has the simplest form of ownership in terms of establishment and operation
6. A proprietorship firm demands for limited paperwork
7. All losses are acquired by the owner
Despite a lengthy set of advantages, we have mentioned seven in this list. If you are running a sole proprietorship firm, you are supposed to develop a healthy relation with the lawyers, accountants, bankers, insurance agents, marketing professionals, business consultants, and business loan providing companies. Well, this kind has some negatives, too. If we count the drawbacks, we get an equally long list. And we are also responsible for knowing the small set of disadvantages. Knowledge about the positives and negatives makes our job easier.
The Negatives of a Proprietorship Business:
1. The owner is solely responsible for making all the management decisions
2. Whether it is related to staff hiring, policy-making, and problem-solving, the owner needs to handle
3. The owner is solely responsible for all debts, taxes, and claims incurred by the business
4. A proprietorship firm faces little difficulties in raising capital
5. It automatically combined with other income sources
6. Individual tax rate of the business owner is considered while making profit tax
7. Continuity of business disrupted by owner death, disability, or departure
For the successful establishment of a sole business, you will have to apply for EIN which is actually an employee identification number. The EIN, however, helps you in dealing with the federal tax, state tax, tax exemption, licenses, permits, and business registration. It is also instrumental in helping the owner for file annual reports. Apart from acquiring the employee identification number, you are also instructed to acquire the Digital Signature Certificate, Director Identification Number, and a MCA account. Its foundation takes a nominal cost which can be managed by a small business loan.
Despite the set of disadvantages, this kind of business offers maximum freedom to the owner which is a no doubt a plus size positive. An Indian entrepreneur is now likely to apply for a proprietorship capital any month of the year as the central and state governments are eyeing in the growth of MSME sector. You could explore more details about the range of ongoing formalities by undertaking the journals published on the scope of sole proprietorship business in India.
By Amit Sharma