Pros and Cons of Sole Proprietorships

A sole proprietorship is a business unit owned and managed by one person. The owner enjoys the benefits alone and also bears all the risks associated with it.

Examples of sole proprietorship businesses include catering company, house cleaning services, freelance writers and tutoring services.

Pros and Cons of Sole Proprietorships

Pros of Sole Proprietorship

  1. Easy to Make Decision

As it is owned by one person, the owner is able to make decisions on which area to improve or adjust. He or she does not need to hold a discussion with anyone to arrive at a solution.

  1. Straight Forward Record Keeping

As opposed to a partnership, in a sole proprietorship, it is easy to keep records. There is no need of employing an accountant to do the balancing of books. The owner is able to keep records by himself or herself. There is also no minutes that are written to be referred to as there are no meetings that are held.

  1. Dissolution of The Business Is Easy

In case the owner feels that he or she does not want to continue with the business anymore, he or she only needs to notify the government as it is the one that collects tax.

  1. Simple Taxation Procedure

In a sole proprietorship, the owner is the one that files the returns. As to oppose to partnership or corporation, the business will have to file the returns and also the individuals will have to file theirs separately.

  1. Formation of The Business Is Easy

The owner requires to do very little writing and presentation of the papers to the authorities. He or she only needs to notify the authorities around his or her locality or city.

  1. Control by the government

As the business is managed by an individual, it is only subjected to a few regulations.

Cons of Sole Proprietorship

  1. Difficulty in getting capital

The money needed to start the business entirely should be contributed by the owner of the business. This makes it difficult for the owner as the banks do not give loans to individuals easily as opposed to the partnership.

  1. Business life is uncertain

As it is easy to dissolve, the owner may end the business anytime compared to a partnership. He or she will not have a long procedure to dissolve the business hence subjecting its life to uncertain.

  1. Lack of liability protection

As the owner bears all the liabilities, in case the business incurs losses and is unable to pay its debts, the creditors may go for the owner’s assets which may render the owner losing everything.

  1. The appearance of the public looks informal.

As it easy to start the business making it go through a few legal formalities, the public may view it as not run by professionals.


As someone is looking for a business to start, should way both the pros and cons as they will act as a guideline of starting the business. Therefore, a sole proprietorship is the easiest business unit to start when compared to other units.

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