It is a familiar American goal to own ones own business. This means building up the capital, interest, and investors, and then bringing to the market something people will want to buy. Businesses can take all shapes and sizes, ranging from individual operations to large multi-national corporations. Is there any form of business ownership that is better then others?
Lets take a moment to examine proprietorship. Proprietorship, or sole proprietorship as it is also known, refers to a person who owns his or her own business. While not a legal entity in the strictest sense, it is nonetheless considered the simplest form of business out there. So, what are the advantages and disadvantages of this business structure?
The Advantages of Proprietorship
1. Complete Control of the Business
Having sole proprietorship over your business means that you can make all the decisions regarding its operation. Sole proprietorship allows for an unprecedented level of control within the business world. As the sole proprietor, you can expand when you want to, diversify your product selection on a whim, and even stop the business when you feel like it. Simply put, you are beholden to no one.
The Disadvantages of Proprietorship
1. Responsible for Debts
As sole proprietor, you are directly responsible for all debts that the business acquires. This means that if you are running your business, and you suddenly owe thousands of dollars for orders with no income you will be held personally responsible for paying. This means that you may lose your possessions to pay the bill. While other company structures may offer you less power, they also offer some risk against debt. In those cases, you will not acquire the debt of your company if the company goes under.
2. An Echo Chamber
Running a business successfully is about integrating a number of different ideas into a new product that has a purpose and function. This is much easier to do when there are people around you to bump ideas off of. Running a business as the sole proprietor means that what you say goes. If there is something that your employee realizes is wrong with what you are doing, they have no way to save the company. Given that no person is perfect, and that we all make mistakes from time to time, having that backup can be crucial for a successful business to operate.