A sole proprietorship is a very popular form of business due to its simplicity, as it is easy to set up, and has a nominal cost. A sole proprietor will need to register itself and secure a local license and, as soon as this is ready, the proprietor is ready to rock on the business. Getting an emergency loan might be of great help when setting up the business. Therefore, I will share some insights regarding what are the steps to start this kind of business and what are the options that you should consider if you want to establish one.
- What is a sole proprietorship?
- It is a term used for a person who owns the business and is legally responsible for any debts it might acquire.
- What are the steps to starting a sole proprietorship?
- The first step is to know the business you will start. This can help you plan the initial stages to have a smooth sailing business.
- Prepare your budget. Since you are the sole proprietor, make sure that you have enough funds to sustain your business. Most banks offer loans for business owners as long as you meet their qualifications.
- Get the requirements. Documents and licenses required by the government should be complete before starting the operations. This is to prevent you from paying fines and worst, closure of your business.
- Open a bank account. This is a requirement to separate business money from your personal money. This will also give you a clearer view of your profit and increases your credibility in the bank if in case you needed to apply for a loan.
- Spend within your means. As much as possible, be financially prepared when you want to start a business so that you only have minimal liabilities to pay. This will make earn your ROI faster. Always be prepared for unnecessary situations because you are the only one who can help your business surpass these events.
- What options should you consider outside of a sole proprietorship?
- Other than a sole proprietorship, you can consider partnerships, limited liability company or LLC, corporation, and cooperative. Choose what is best for you and what makes you more at ease.
- What are the pros and cons of a sole proprietorship?
- In a sole proprietorship, you are the only one who will decide on your business but on the other hand, if something bad happens, you are also the only one responsible for it.
- Sole proprietorships’ income is treated as a personal income by the government making it easier for you to file taxation. On the other hand, it is difficult to raise funds or long-term financing because of lesser assets.
- What are the tax implications of registering as a sole proprietorship?
- A sole proprietorship is often treated as a personal income that is why it is taxed through a personal tax return. You do not need to file a separate tax return for your business because you have to declare all your business income and losses through your personal tax return.
