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Sole proprietorship – advantages and disadvantages

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Last updated on February 27, 2017

Consider operating as a sole trader if your business is small and capital investment is minimal.

Advantages of sole trading include that:

  • you’re the boss
  • you keep all the profits
  • start-up costs are low
  • you have maximum privacy
  • establishing and operating your business is simple
  • it’s easy to change your legal structure later if circumstances change
  • you can easily wind up your business.

Disadvantages of sole trading include that:

  • you have unlimited liability for debts as there’s no legal distinction between private and business assets
  • your capacity to raise capital is limited
  • all the responsibility for making day-to-day business decisions is yours
  • retaining high-calibre employees can be difficult
  • it can be hard to take holidays
  • you’re taxed as a single person
  • the life of the business is limited.

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