Characteristics of Sole Proprietorship Business Form

Sole proprietorship is the most common form of business ownership. It is the most popular because of the simplicity of formation. Today, there are 23 million sole proprietorship in the United States of America. The US government earns most of its taxes from Sole proprietors amounting approximately 32 Million Dollars. This post on characteristics of sole proprietorship business form will thoroughly analyze and elaborate the most common characteristics of Sole Proprietorship.

Characteristics of Sole Proprietorship Business Form

Easy to Form

It is very easy to form. Anyone can start and run a business that forms as a sole proprietorship. Unlike corporations or partnership businesses, it is very simple for a person to start his/her business as a form of sole proprietorship. An individual can manage this form of business single handed as the it does not have complicated operations or legal boundaries. 

Low Cost Startup

Generally, starting a business takes a lost of cost. That is why starting a business is expensive. But, for sole proprietorship, the picture is different. You can literally start any small business with low cost. Sole proprietorship can be started with any amount of money. 

Controlling Power

Corporations controlling power depends on the board of the directors. Unlike corporations, where it has a board of the directors, in sole proprietorship, the controlling power is centered to its owner. So, you can have the complete control over your business organization. This is a freedom in your own business, unlike corporations. 

Decision Making

There are no barrier in the decision making ways in business strategy and management. The Strategy Watch elaborates more about business strategies. You can make your own decision as you are the single owner of your business. On the other hand, in partnership you need to take other people's permission or talk with them while making a single decision.

Taxation

Sole proprietorship is really different business form when its about the taxation. In a sole proprietorship, the profit is taxed as the personal income of the owner. There is no complicated or high taxation like corporate taxation. 

Few Legal Formalities

As it is the simplest form of business form, it is easy to start and run. But, forming a corporation is so much easy. In the formation of Sole Proprietorship, there are very few legal formalities which make it simple to form. 

Unlimited Liability

The liability is not like the corporations of the partnership forms of business. This is unlimited in the case of sole proprietorship. All the liabilities go to the owner of the business. 

Associated Risks

Risk is everywhere. The risk is involved in every business form. The owner has to take all of the risks associated with the business. 

Limited Life

The life of the business is limited to the life of the owner. That means, if the owner dies, there is a huge chance that the business dies as well.

Bottom Line

All of the characteristics of sole proprietorship have been discussed above. Though it has few drawbacks, but still the high number of positive characteristics make it easier to form a sole proprietorship. That is why most people prefer to start their business as a form of sole proprietorship.

Sources:

• Tax foundation Individually Owned Businesses
• Advantages of Sole Proprietorship

Related Read: Ways to Increase Profit in Small Business