Every country has different laws for business and the laws differ depending on where you are in the world. In general, forms of enterprises are grouped into 1) owned by one person (sole proprietorship); and, 2) held by a group (partnership or corporation). If you happen to plan in building your enterprise, you need to know that both forms are unique in their own right. And no one is above the other, because it depends on your goals in building the business.
When you talk about the legal and financial side of it, though, many consultants will suggest that you go for a partnership or corporation. It is because you get a lot of perks, like getting protection from the state, declaring tax claims, and protecting your finances. It is because your business is separate from your personal life, that’s why you get to defend yourself if ever you get problems business-wise.
Even though many consultants prefer a partnership or corporation, going for a sole proprietorship has its perks, too. For one, you don’t get into the complicated processes of registering your business, filing for your monthly tax, and registering for your tax returns. The process is straightforward for you compared to those managing a partnership or corporation, where they have to get all the board of directors to sign the papers every time. Also, if you want a no-fuss business to start with, then going for a sole proprietorship is your best option.
When it comes to the investment involved, a sole proprietorship also costs less than having to register for a partnership or corporation. You only need to pay minimal fees, with fees that won’t even add up to $100 in some countries (like New Zealand). It is to encourage people to start their businesses in this economically unstable environment.
When you also want to decide without problems, and without having to consult all the board of directors for approval, then going solo is best for you. You don’t have to wait for weeks to get approval or to keep on revising papers before you arrive at a decision. When you go solo, all you need is your ultimate decision, and then you can take things forward from there.
Despite these advantages, going solo also has its disadvantages. Here are the downsides of managing a sole proprietorship that you need to know about:
1. Lack of check-and-balance
When you manage the business on your own, you do all the deciding on your own. You may think that you are heading towards the right path, and you may feel that you are doing the right thing. However, when things go wrong, you realize that you have been doing the incorrect thing all along. That is the danger of deciding on your own because you lack the check-and-balance that is a common theme in partnerships and corporations. You don’t know if you are headed towards the right path, or there is something else that you have to improve on.
The lack of check-and-balance is one of the biggest reasons why many sole proprietorships fail. Owners do not get the support they need, or they become stubborn to listen to others’ opinion. If you are a sole proprietor, you need to get solid foundations for you to get to where you want to be. Enroll in basic accounting, bookkeeping or an entrepreneurship class to help you get started.
One of the most significant downsides to running a sole proprietorship is the work needed for you to get things done. Because you are the manager and owner of the enterprise, you need to oversee a lot of things and make sure that everything is running smoothly. When you do all the managing on your own, it can take a toll on your body and mind. Instead of helping your business succeed, you end up running it down.
When you go solo, make sure that you delegate tasks appropriately. Do not feel that you need to get everything done by yourself, because if you don’t focus, you lose the momentum that your business needs to succeed. Not only will your enterprise suffer, but also, your health, as well. Hire people whom you can trust, and whom you can assign to different tasks. Have TempCFO.com handle accounting, another for operations, and another for marketing. Of course, you cannot just leave them to do their job, as you need to know what is going on with your enterprise. You need to be still hands-on and understand the ins and outs of your business, especially the financial side.
Overworking and the lack of check-and-balance are some of the downsides to managing a sole proprietorship. It can be challenging to operate a business when you have to do everything on your own. However, at the same time, you get to do what you got to do, and you get to decide on your own. You don’t have to go through weeks mulling over decisions with the board of directors. You can do the deciding, but be sure that you get the fundamentals that you need to succeed.