Corporation Vs Sole Proprietorship
Making a corporation or a sole proprietorship both need hard work
, commitment, and money. There are different advantages and disadvantages of making a corporation VS sole proprietor. Some of the advantages of sole proprietorship are as follows. It is easier to make a sole proprietorship. There are fewer documents required and also fewer guarantees required. This significantly reduces the legal requirements. The capital requirements are also there for the corporations in almost all the countries. You dont need any capital requirements usually in case of sole proprietorship. It is easy to maintain the documents in case of proprietorship and also much easier to calculate the income as well as the tax. The amount of money involved in sole proprietorship is comparatively many times smaller, this makes easier to manage funds and also to finance the business from external sources whenever the need arises. There are however some disadvantages of making a sole proprietor business as well. The first, the most dangerous and obvious one is that the business has unlimited liability. This means that if your business fails then you have to pay back even through your personal assets which have nothing to do with the business. Small financial management often overlooks the need to actively manage funds, which resultantly create financial problems for the business. The proprietor has no help in case of problem and is all alone in what he does to his business. The assets of the sole proprietor business are very few, so raising finances is a great problem in itself.Corporation advantages are very important. First there is a limited liability and if the business defaults owners of the business are only liable up to the amount of investment made in the business. It is easy to calculate taxes. With a lot of management it is not difficult to manage the affairs. It is very easy in case of a corporation to raise funds through IPOs (shares) or other means as well. There are problems with making and running a corporation as well. The first problem is that you usually arent able to gather much money to form it initially. It takes a lot of requirements and legal documentation to complete and is under additional instructions of security and exchange commission if it has to go public. It is very difficult to manage this much amount of activity. And corporations can be bought easily by share holders. These are some of basic advantages and disadvantages of both corporations and sole proprietorship to help you make the right decision.
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