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Small Business: Is it better on your own? 

Small Business: Sole Proprietorship 

If you decide to operate your small business alone without incorporating or forming a partnership, you are operating as a sole proprietorship.  This is the easiest form of small business to start as you do not need partnership agreements or need to file documents to incorporate.  The only thing that you may need to obtain would be a proper license in your state, county, town, or city to conduct the type of business that you are interested in. These are the most common forms of small business structures in the United States, making up more than 70% of all businesses in this country. 

 This type of small business structure means that you are the boss. You make all of the decisions and have all of the responsibility for the consequences of your business affairs.  In proprietorships, your name will appear on greeting cards and other congratulatory notes when you decide to open your small business. However, brace yourself for some difficulty. Very few small businesses get off to a smooth start and see profits in the first, second, or even third year.  As a sole proprietor, you'll be the lonely sole awaiting your profit-and-loss statement.  You'll be the only one with tough decisions to make, no matter how much you delegate, the overall accountability will always fall upon your shoulders. 

Some of the advantages to running a small business with this structure are that it can start out easily and informally, without a lot of legal documentation. These types of small businesses are also very flexible in how the operations are conducted. As a sole proprietor, you do not need the approval of others.  In fact, others need your approval.  You don’t have to worry about a partner or Board of Directors agreeing with your decisions.  Even taxation is a simple process as you pay taxes based upon your income.  Taxable income from your business goes directly through your personal income taxes on an IRS Schedule C, which calculates the profit or loss from your small business. If your business does well you will be the one reaping the rewards.  You'll have total ownership and control of the small business.  Of course if the business fails, you will be responsible for answering to the investors and creditors. 

The issue of personal liability is the main reason that some small businesses opt for other business structures rather than sole proprietorships.  You are responsible as an individual, so if your small business goes in debt, even if you shut the doors and take down your sign, you are still personally held liable for the debt.  You can take out product insurance, insure your equipment, or take out other forms of insurance to try to cover yourself, but it may not be enough to cover yourself completely. 

Some people have difficulty operating a small business of this type because of the psychological issues involved in "going it alone". While you have no one to answer to, also you have no one else to do half of the work, raise half of the money and solve half of the problems that you do when you have a partner.  However, if you feel confident in your abilities and can handle a wide range of responsibilities, calling in the right people at the right times for assistance, then this may be the best form of small business for you.  Later, if you decide that another small business structure is more effective you can make a change that point in time. 

Some information provided by Everything: Start Your Own Business Book by Rich Mintzer  

Web page and Start Your Own Business Course by Paul Susic M.A. Licensed Psychologist Ph.D. Candidate CEO/President Susic Psychological Consulting P.C.