The sole proprietorship is the easiest to manage and most flexible business structure, according to the Singapore Company Registrar (or more formally referred as the Accounting and Corporate Regulatory Authority).
In this business setup which is particularly ideal to micro and small business, there is only one person who owns all the assets, legal duties, and financial liabilities and debts related to his business.
One of the most common reasons why businessmen choose sole proprietorship over some business structures is that they enjoy full control and authority when it comes to managing their business. With this, they can steer their business and make decisions anytime they want without having to consult or seek the approval of other people.
But the advantage of having a full authority over a business also comes with a major downside: as the only owner, a businessman is personally responsible for all the financial losses, debts, and claims and lawsuits related to his business.
According to the Singapore Company Registrar, these are the primary features of the sole proprietorship:
– The business, which does not stand as a legal entity, cannot be separated from the sole proprietor. With this, it cannot purchase supplies, file a lawsuit, or own properties under its name.
– The sole proprietor does not enjoy limited liability which means that he is personally liable for the financial losses, debts, lawsuits and claims related to his business.
– The business existence depends on the sole proprietor which means that if the latter dies or becomes seriously disabled, it may cease its operation.
It is important to remember that all business structures, including sole proprietor has its advantages and downside which must be first considered by entrepreneurs before they register their business:
The Advantages of Sole Proprietorship
Since the business is only owned by one person, it is easy to transfer and sell the business assets as there is no need to seek the approval of other individuals. With this consideration, it is safe to say that the business is relatively easier to liquidate compared to other business arrangements such as the partnership and corporation.
Another advantage is that the sole proprietor enjoys all the earnings of his business without having to share these to other people, which is the case in partnership and corporation.
The Disadvantages of Sole Proprietorship
As a sole proprietor, a businessmans personal assets such as houses and cars are not protected from the financial losses, debts, and duties of his business. This is not the case in limited liability partnership and corporation.
It is also more challenging for the business to raise funds and capital because there is only one owner.