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Sole Proprietorship
This is the most simple of all legal mechanisms and may provide the ideal conduit for the small businessman. Certainly, it is not encumbered with the legalistic formalities of other business organizations and the owner does have complete control to hire, fire, enter into agreements or even cease to trade however and whenever he so pleases. Unfortunately, this complete control and simplicity is tempered by the simple fact that there is no legal distinction between the actual business and the owner. In other words, any liabilities, debts or charges for which the business is liable, you are also personally liable.
Advantages of Sole Proprietorship
- Owner has complete control over all business affairs Simple to administer and operate.
- Long established business mechanism
Disadvantages of Sole Proprietorship
- No distinction between personal and business entities and therefore, no protection for one's own personal assets. There is no tax distinction between personal and business income, often leading to an inefficient use of potential tax savings.
- A Sole Proprietor is directly liable for the actions of his employees.
- Action taken by creditors is often quicker against an individual than against a corporate entity.
- The physical movement of the entity will always correlate with the physical movement of the owner. Generally, most tax benefits are, particularly where 'foreign' transactions are involved, accrued from distinguishing between a person and his business.
- Save where the individual's reputation is established such entities are not considered as' reputable' despite the increased exposure.
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