Sole Propietorship – A Story You Can Learn From

Sophie had to choose between starting a sole propietorship or a more complex business structure for her new cake baking business. After due consideration, she opted for the former. Here’s what she had to say on her decision to keep her new sole proprietorship business.

“I was starting off on my own, and what with all the family responsibilities, I knew that it would remain a small business for a while. I talked with Steven, my neighbor and business adviser and he said that a sole proprietorship would suit me just fine, at least until the business started making money hand over fist. ”

“He went on to tell me about the advantages of a sole propietorship model and also cautioned me about the things that could go wrong. I figured that I could handle the risk, since I wasn’t planning on doing anything stupid or overreaching myself.”

Up and running in no time: Having taken that important decision, Sophie found that it took hardly anything to “be in business”. Since she was planning on operating under her own name, and didn’t expect any interstate business just yet, there were very few start-up formalities. “I approached the country clerk’s office in my area, and they guided me on what was required. Later, I found out that you can even get the forms on the internet, from sites like Legal Messenger.

Cost next to nothing: Says Sophie “Since I was going to mostly advise people on cake decoration, there wasn’t much I needed by way of tools or equipment. I invested wisely in a few books; that was all. And there were hardly any costs related to setting up a sole proprietorship, for which I was really glad”.


No paperwork: If there was something that Sophie hated, it was getting sucked into a mine of paperwork. Thankfully, in a sole proprietorship, she didn’t have to worry about preparing income statements for her business. And filing taxes was a breeze, since she simply included her business income while filing her personal tax returns. She was, of course, sensible enough to maintain a separate bank account for her business income.

In full control: As the sole propietor, Sophie enjoys full control over business decisions. That gives her enormous flexibility to change things and grow at the pace she chooses. And as the business gains momentum, she’s beginning to make useful additions to her bank account.

When asked what she would say to other entrepreneurs who wanted to operate a sole propietorship, this was her response. “It works just fine until a certain point. However, with my business growing steadily, I have been thinking along the lines of incorporating someday. The issue of unlimited personal liability in a sole proprietorship does worry me, since the last thing I want to risk is the family home and property. I also think that if I need to expand the business suddenly, I will need capital, and that’s less easy to get with a sole proprietorship. At some point in time, I will look at diversifying into other cities, for which I will need a full team. A company is much more likely to attract talented people. I’m planning to talk to the guys at National Business Incorporators to see where it leads me.”

“And finally”, she sums up, “it can become a very lonely existence. Sometimes, you need people around you to contribute with ideas and lend a fresh point of view. For me, that’s the hardest part of running a sole propietorship business”.

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