Advantages & Disadvantages of Sole Proprietorship Registration

Sole Proprietorship is owned and managed entirely by a sole person. In simple terms, it is the One-man business operated by a single natural person and not a legal person. Sole-proprietorship is not a separate legal entity, and thus the sole owner is liable to pay off the liabilities and debt incurred by the business.

Let us look at some of the key features, advantages, and disadvantages of sole-proprietorship.

Following are the advantages of sole proprietorship registration online, making it the most common choice of start-ups:

• Entire Control: Proprietor shall have complete control over its entire business, making it easier in the quick business decision, and there is freedom to operate as per the wish of an entrepreneur.
• Minimal Compliance: Law imposes minimal or almost no restrictions on sole proprietors. It needs not to publish or file its financial statements or any other documents to any authority, public or similar. As the Proprietorship is not registered with MCA or any tax authority, it needs not to comply with the provisions of these authorities.
• Maximum Incentives: Sole-Proprietor needs not to share the profit or income with neither any partner nor it has to distribute its profit in the form of a dividend, thus incentivizing itself at max.
• Being your own Boss: This is not just a quote, but there is a great sense of satisfaction & achievement to start up your own business in which you are answerable to no one, and one can boost up their self-worth.
• Establish with Ease: Sole proprietor needs no formal or legal registration and can start using PAN and Aadhar of the individual.
• Optional registration: Sole proprietor can get itself registered with authorities such as GST, can take Udyog Aadhar registration online, Shop & Establishment registration or the like that is completely optional and upon the discretion of sole-owner.
•  Easy tax compliances: Sole-Proprietorship if incurred the income exceeding 2.5 Lakhs needs to file ITR otherwise no tax compliance is imposed on sole-proprietorship.

Every aspect comes with pros and cons; thus sole-proprietorship in spite of having several benefits had certain demerits such as:

• Unlimited Liability: The biggest flaw of sole-proprietorship is that the owner is personally liable for loss, debts, and liabilities of the business. The proprietor shall sale his assets to meet the liability of the business.
• Hurdles in FundRaising: Sole Proprietorship cannot raise the fund through the issue of shares, or there is no partner’s contribution, thus creating the problem for funds to the business.
• Huge Tax imposition: Proprietorship is taxed similar to the individual as they are taxed as per the income tax slab. 
• Financial Control: There is no strict financial control when it comes to cost & financial maintenance in sole-proprietorship.
• Huge responsibility: Several responsibilities are bundles on the shoulder of a single owner, making it sometimes difficult to manage entirely on his own.

Following key-features for better understanding of sole-proprietorship:

• Legal Formalities: There are no separate provisions governing sole-proprietorship thus no legal formalities such as incorporation certificate or any other registration are needed. 
• Liability: The business is not different from its owner in the case of sole-proprietorship. Thus, the liability of the owner is unlimited. 
• Risk-taking: The sole owner is fully liable for the risk he takes is the only financial investor of the business. The concept of "Higher the risk, more the return" is the sole of the owner.
•  Continuity: As we know, sole-proprietorship and the owner are not a separate legal entity; thus, business continuation depends upon the death, retirement, bankruptcy, etc of the owner. In such cases, business comes to an end.

One of the simplest and easiest methods of starting any business is through sole-proprietorship that doesn't require any registration or legal incorporation. Sole Proprietorship is the common choice for new start-ups willing to start on a small scale to run small or medium-sized businesses.

You can contact our team of vibrant, updated and experienced professionals to assist you for further guidance and information on Sole-Proprietorship.