Pros and Cons of Running a Proprietorship Organization

Introduction

A proprietorship organization is a business that is run by a single owner. These are small organisations. The Organization was entitled to all profits but they were also responsible for all the debt, loss, and liabilities. Further in this article, we will discuss the pros and cons of running a proprietorship business. 

Merits of Running A Sole Proprietorship Organization 

1.Simple registration: 

In sole proprietorship there is no formal incorporation or dissolution procedure. To comply with Indian rules and regulations, the owner of a business may need to secure specific licences and registrations in order to operate. To open a proprietorship firm in India, the proprietor must obtain specific permits and registrations. These include:

  • Pan and Adhar Card
  • UDYAM Registration
  • GST Registration
  • Bank current account
  • Shops & Establishment Act

Hence, it is simpler to open a sole proprietorship business in India.

  1. Minimum compliance:

Since most proprietorships merely register with government agencies such as GST and Income Tax, there would be less work to do in compliance. However, organisations such as LLPs companies must register with the Ministry of Corporate Affairs, file a number of statutory returns, and undergo an annual audit by a chartered accountant.

  1. Business decision:

The owner of a proprietorship makes all business choices. No other person’s permission or consent is necessary. As a result, an owner is typically able to make judgments about his business matters quickly.

  1. Total control: 

The owner of a sole proprietorship is the only person who owns it. He or she is in total charge of the company’s resources, earnings, outlays, and daily activities.

Demerits of Individual Ownership of Business

  • Personal liability:

In a proprietorship organization, the owner’s assets may be attached or encumbered if they fail to make business loan or tax payments. Because of this, the owner of this kind of business structure will be held personally liable until all liabilities are satisfied.

  • Growth: 

A proprietorship has several limitations on business continuity, liability, and funding. Therefore, proprietorship is only used by very tiny, unstructured firms.

  1. Raising capital can be difficult:

If you anticipate needing to raise capital from outside investors, it is not a good idea to set up your company as a sole proprietorship. This is due to the lack of a legitimate business to sell, making it nearly impossible to obtain capital without actual assets or intellectual property that potential investors may purchase.

Since sole proprietorships are limited to one owner, no one may invest equity in them. They will change from being a sole proprietorship to a general partnership if they do accept an equity investment.

  1. Unincorporated business: 

Businesses run by sole proprietors are not incorporated. As a result, there is no centralised database that can be used to determine the status of a sole proprietorship. Sole proprietorships are typically categorised as unstructured business organisations.

Conclusion

Even with these difficulties, a lot of business owners find a lot of fulfilment in running their own company. It enables people to follow their goals and make choices free from outside influence. In the end, choosing to become a single proprietor should be thoroughly thought out, taking into account both the benefits and drawbacks. To make an informed decision that is in line with your objectives and desires, it is crucial to consider the possible risks and rewards and obtain professional assistance from experts or consultants.

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