Sole Proprietorship Advantages and Disadvantages

Tue, 10/06/2015 - 01:01 -- Umar Farooq

Advantages of Sole Proprietorship

Sole proprietorship enjoys the following benefits over other forms of business organizations

Easy Formation

Setting up a sole proprietorship is very simple, because there are no special legal formalities like permission from government; preparation of necessary documents, registration etc. required to start the business as Sole proprietorship. One can start it at any time and at any place according to his financial capacity. This feature attracts most of the potential investors to invest.

Easy Dissolution

The dissolution is also very simple just like its formation. When the owner feels that the business is going to suffer the losses, he may dissolve and makes his investment safe in some other sector.

Taxation

Sole proprietorship enjoys the tax advantages over other forms of business organizations. For the purpose of income tax owner and business are treated as same thing, Income is treated as the personal income of owner, hence taxed as an individual and not as a business unit. Moreover, the income tax rate is low for sole proprietor.

Prompt Decisions Making

As One man Show, it is considered best to take quick decisions. There is no need to consult any other person, so the sale trader can take quick decisions on all important issues. This enables the owner to avail business opportunities. The owner makes timely and quick decisions according to market trends and gets a competitive edge

Best Customer Relations

The sole owner has a direct link with his customers. He has complete information about the likes and dislikes of the customers. So he tries to deliver those products and services which are in greater demand which makes his business more profitable.

Sole Proprietorship Advantages

Disadvantages of Sole Proprietorship

Apart from many benefits it has also some disadvantages as well.

Limited Resources


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