Sole Proprietorship
Best for: Individuals who are starting a small business on their own.
Key Features:
- Ownership: Owned and run by a single individual.
- Liability: The owner has unlimited liability, meaning personal assets are at risk if the business incurs debts or legal issues.
- Control: The owner has complete control and decision-making authority.
- Taxation: Income from the business is treated as personal income, and the owner pays tax on profits at personal income tax rates.
- Registration: Easier and cheaper to register. It often requires fewer formalities than other structures.
Advantages:
- Simple and inexpensive to set up.
- Full control over business decisions.
- Fewer regulatory requirements.
Disadvantages:
- Unlimited personal liability.
- Limited ability to raise capital or bring in partners.
- Business continuity issues if the owner leaves or passes away.
When to Choose a Sole Proprietorship?
If you’re a small business owner starting a one-person operation (like freelancing, consulting, or a small retail store).
If you want to test your business idea without the complexities of a more formal structure.