In a corporation or LLC, there are more than one people responsible for the business whereas sole proprietorship is operated by one single owner. Here the man who has formed the business is boss and can do anything he wants. From all aspects of the business to profits out of it would be handled by the owner. That’s mean the entire profit will go into the owner’s pocket. Therefore, the sole proprietor is responsible for all debts, loan, income tax, finance and so on. Sole proprietor’s income is taxed on a personal income tax return.

Advantages of Sole proprietorship –

  • Easiest business model to set up– Sole trading is one of the easiest business model and easy to make success in the local area.
  • Requires less capital and limited liability and so financial risk is low in comparison with the big corporation or LLC
  • All profits go into the owners pocket
  • Few legal formalities – There are few legal formalities for sole proprietorship like registering your business under government and tax section. So the process of closing your business, if proprietorship falls apart, is trouble-free.
  • Full control over business – Since Sole trading forms depending on one person, the whole control goes under the owner. He would take control of every activity of the company.

Disadvantages of Sole proprietorship –

  • Raising capital for the business
  • No protection for personal asset –Since Sole proprietorship goes into assets, so the chances of losing your asset are high.
  • The business ends with your death – The business may end up with owners death due to lack of expertise owners and so the value of your business. Though some owner prefer passing on the business to heirs
  • Lack of business continuity – One of the biggest problems with a sole proprietorship is lack of business continuity. Under an error like death, insanity, imprisonment of the owner may lead the business to be shut down.

Individual mainly operates a sole proprietorship, and all risk, expansion , income tax is beared by the owner. Here the risk is high because the owner the whole business is the liability and. If things went wrong, the owner might lose all including his property.

Though the most significant functional advantage of a sole proprietorship is Owner can take leave anytime, he wants, and The full profits from the business go directly to the owner’s account. Comparing with big limited industry, the opening cost of a sole proprietorship is inexpensive, and the owner gets full control over the business. He can do anything he wants.
A sole proprietorship is easy to structure, and people choose this business entity because the tax rate is meager than LLC. Another reason for choosing sole proprietorship is the owner does not have to share his profits and secrets of business. It provides a direct introduction to customers, so building trust is easy. Additionally, Government Regulations is minimum and hassleless.

Despite the advantages, The most hardships that sole trading faces is no protection for the personal asset. Production rates don’t run in great quantity on what basis the growth rate can be illustrated as unsure. This perpetual entity may also end up with owners death or due to lack of experts. Unlike other business entity, raising capital for sole trading is limited because of no partnership facility.


Chayan is a student who is now focusing on his career, besides serving most of his days behind writing articles on this website. He is very much passionate about writing creative contents. He writes for the sake of writing!

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