An individual may carry on business in his/her own and register an unlimited company. The liability of the individual of the company for the debts of the company is unlimited, i.e. in the event that the company is unable to pay its debts in full, the individual is responsible for paying the debts of the company in full.
Advantages of forming a sole proprietorship
- Sole proprietorship is the simplest and most flexible business structure.
- The sole proprietor has total control and full decision-making power over policies, profits and capital investment.
- It is easy to close down the business.
- Profits from the business will be taxed at the sole proprietor's marginal tax rate, which may be lower than the corporate (limited company) tax rate. Also, business losses can be offset against the other income of the proprietor.
Disadvantages of forming a sole proprietorship
- Risks that are taken by the sole proprietor may result in personal bankruptcy.
- The death or prolonged illness of the sole proprietor will lead to the end of the business.
- Due to the limitations of a one-person business, the sole proprietor may not be able to raise additional capital from outside sources to expand the business.
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