To start a new Business, the Sole proprietorship form is the most popular one. The United States itself has more than 80 million entities in the form of a popular sole proprietorship.
It is also known as the sole trader, individual entrepreneurship, or proprietorship owned and run by one person. There is no legal separateness between the owner and the business entity. A sole proprietor does not necessarily work ‘alone’—the sole trader can employ other people.
The sole business trader receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. The proprietor owns and all debts of the business are the proprietors. It is a “sole” proprietorship compared to partnerships (which have at least two owners).
A proprietor may use a trading name or business name other than their or her legal name.
- ADVANTAGES AND DISADVANTAGES OF SOLE PROPRIETORSHIP:
Registration of a business name for a proprietorship is generally uncomplicated unless it involves selecting a fictitious or “assumed” name. The business owner must register with the appropriate local authorities to determine the name of the entity. The business owner must fill up a form “DBA” or “doing business as.” in some US states is the Secretary of State.
A sole proprietary business is entitled to hire employees and enlist the independent consultants’ service. It is transposed unlimited liability to The owner, carries the financial responsibility for all debts suffered o the business, to the extent of using personal or other assets to repay any liabilities.
- RULES OF SOLE PROPRIETORSHIP IN DIFFERENT COUNTRIES
- UNITED KINGDOM:
A proprietorship is the easiest form of enterprise structure defined in UK law. It connects to an individual who owns their business and owns all the profits from it. In the beginning, sole traders must complete a straightforward registration with HM Revenue and Customs as self-employed for tax and National Insurance purposes. They are responsible for maintaining the business’s ledgers and submitting an annual Tax return for all income.
- UNITED STATES :
There are fewer formalities in the United States to start a sole proprietorship or commence business as a sole proprietor. However, depending upon the sole proprietorship’s business activity, sole proprietors may require licenses and permits to run the enterprise.
- RULES OF FINANCE FOR SOLE PROPRIETORSHIP:
As per the Small Business Administration (SBA), a sole trader and their business are considered the same; the business is not subjected to separate taxation and is regarded as the owner’s direct income. Income and expenses may be listed on Schedule C, then transferred to the owner’s tax return.
- FINANCES :
For the sole proprietor, there are various options in obtaining financial assistance for their business, including loan facilities from the U.S. Small Business Administration. The SBA does not originate from the loans, but the administration guarantees various independent lending institutions’ loans. Sole proprietors can finance legitimate operating expenses, like working capital, leasehold improvements, building renovations, furniture, machines, tools, etc.
Many private organizations and individuals are looking for opportunities to invest and fund a business that may not qualify for traditional financing like banks. The sole proprietor is looking to take advantage of this facility; various factors must be understood and adhered to in the loan application.
