Introduction of Sole Proprietorship
When you are looking for Sole Proprietorship Examples you need to understand the Individual entrepreneurship, sole tradership, or proprietorship is also known as a sole proprietorship. It is owned and run by one person. There can be no legal type of distinction between the owner and the business entity. A sole trader doesn’t necessarily work “alone.” The sole trader can employ other people.
The sole trader also receives all profits, which is subject to taxation specific to the business) and is responsible for all losses and debts. The proprietor also owns every asset of the business, and all business debts are the proprietors. It is also a “sole” proprietorship in contrast with partnerships (with at least two owners).
A sole proprietor may be using a trading name or business name other than its legal name. They may be having to legally trademark their business name if it differs from their legal name, the process varying depending upon the country of residence.
- To mainly exclude of all other is done solely for a self money.
- It also means without another : A singly went solely on her a way.
Understanding Sole proprietorship
A sole proprietorship is completely different from corporations (corp.), limited liability partnerships (LLPs), or limited liability companies (LLCs) in that it is no separate legal entity is created. As a result, the when the owner of a sole proprietorship business is not an exemption from liabilities incurred by the entity.
E.g., the debts of the sole proprietorship are also the debts of the owner. However, the sole proprietorship’s profits are also the owner’s profits, as all profits flow directly to the business’s owner.
The primary benefits of the sole proprietorship are:
The pass-through tax advantage was mentioned before.
The ease of creation.
The low fees of maintenance and creation.
The drawback of a sole proprietorship is the unlimited liability that goes beyond the business to the owner and the problem in getting funding for capital, specifically through established channels, such as obtaining bank loans and issuing equity or lines of credit.
Thus, entrepreneurs can also begin as an entity with known as unlimited liability. As and when the business grows, they often transition to a limited liability entity, such as an LLC or LLP, or a corporation, e.g., S Corp, C Corp, or Benefit Corp.
Sole proprietorship’s advantages
Despite its simplicity, a sole proprietorship also offers several advantages, which also includes the following:
- Inexpensive and easy process
Generally, the establishment of a sole proprietorship is an easy and inexpensive process. Certainly, the process also varies depending on the province of residence, country, or state. However, in all cases, the process also requires minimum or no fees and very little paperwork.
- Some government regulations
Sole proprietorships also adhere to a few regulatory requirements. Unlike corporations, the entities don’t need to spend time and resources on various government requirements such as financial information reporting to the general public.
- Advantages of tax
Unlike the corporation’s shareholders, the owner of a sole proprietorship can be taxed only once. The sole proprietor also pays only the personal income tax on the profits earned by the entity. The entity itself doesn’t have to pay income tax.
Sole proprietorship’s disadvantages
Potential disadvantages can include the following:
- No limit of liability of the owner
Since a sole proprietorship is not creating a separate legal entity, the business owner also faces unlimited personal liability for all debts incurred by the entity. In other words, if a business is not meeting its financial obligations, then creditors can seek repayment from the entity’s owner, who must use their assets to repay outstanding debts or other financial obligations.
- Limitations on capital raising
Unlike other partnerships and corporations, sole proprietorships can generally enjoy lesser options for raising capital. E.g., the owner can’t sell an equity stake for obtaining new funds. In addition, the ability to obtain loans also depends on the owner’s personal credit history.
Rules for sole proprietorship in different countries
In the country of the Netherlands, a sole trader is also known as a “ZZPer.” Any sole trader who needs to register with the Chamber of Commerce and get a VAT ID.
In Ireland, as a sole trader who wishes mainly to use a business name must register that name with the Companies Registration Office (CRO).
Registration of sole proprietorships: famous Sole Proprietorship Examples In the country of Malaysia, three different laws are governing the registration and administration of sole proprietors
West Malaysia and under the Registration of Business Act 1956 (Act 197) in the Federal Territory of Labuan.
Sarawak= Professions, businesses and Trade Licensing Ordinance [Sarawak Chapter 33] & Business Names Ordinance for the State of Sarawak [Sarawak Chapter 64].
Sole Trader example names is known as Sabah= State of Sabah’s Trades licensing ordinance [Sabah Chapter 144].
In West Malaysia, sole proprietors’ registration comes under the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, abbreviated as SSM). In Sabah and Sarawak (except Kuching), the registration of businesses is done with the local authorities (e.g., district offices or municipal councils), while in Kuching, sole proprietors have been registered under the Kuching Office of the board of Malaysian Inland Revenue.
Sole proprietors, comprised of the self-employed, must be registered with the relevant authority within 30 days from the commencement of their business.
Sole proprietors business list Sole Trader might have to register their business by using one of two names=
(1) Their legal name follows the registrant’s identity card.
(2) A trade name. Registration of a business lasts either one or two years and must be renewed thirty days before expiry.
In terminating business, the proprietor has thirty days from the termination date to file the notice with the relevant authority. If the proprietor’s death causes the termination, the estate administrators have four months to file a notice of termination from the death date.
Goods and services tax (GST)-
Sole proprietors must be registered under the Royal Malaysian Customs Department to charge and collect goods and services tax (GST) once their taxable turnover within a 12 month-period exceeds 500 000 RM.
Sole proprietors as employers-
Similar to other Common Law jurisdictions, proprietors may enter into employment contracts and apprenticeships with their employees. Sole proprietors, as employers, are responsible to:
Contribute to their Employees Provident Fund.
Contribute to their employees’ Social Security.
In 2016, the SSM took legal actions against around 478 online businesses that failed to register, whether as sole proprietors, partnerships, or private limited companies. As of May 12, 2017, a sum of 50,882 online businesses has been registered with the SSM since 2015.
Famous Sole Proprietorship Examples is a Sole traders in New Zealand must inform the Inland Revenue Department that they are trading and register for Goods and Services Tax purposes if their income exceeds 60,000 USD per year. Sole traders may acquire a unique New Zealand Business Number (NZBN), which any business in New Zealand can use to identify the business in commercial relationships and deal with the Government.
The United Kingdom.
A sole trader is mainly considered as one of the simplest type of business structure which is defined in UK law. It also refers to an individual who is owning their own business and gains all the profits from it.
While starting up, sole traders have to complete a straightforward registration with Customs and HM revenue as self-employed for National Insurance and tax purposes. They are also responsible for maintaining the business’s records and submitting an annual Tax return for all self-employment and other work income.
In Britain, anyone who have started working for themselves can be considered by the Government as a self-employed sole trader, regardless of whether or not they have been advised by the HM Revenue and Customs. A sole trader can also keep all the profits of their business after the amount of tax has been paid.
They must lodging a self-assessment tax return every year and pay Income Tax as well as National Insurance. In case, if revenue have been expected to be more than 85,000 GBP a year, then they must register for the Value Added Tax (VAT). A sole trader can also recruit a staff but is he would be personally responsible for any losses the business would be making.
Advantages Sole Proprietorship
Relatively becoming a sole trader can be simply compared to other business structures. It can also rapidly enabled a business to begin trading; the requirements for record-keeping are far more simple than other business structures. Sole traders can also make all operational decisions and are solely responsible for raising business finance. They can invest their capital into the business or may be able to access business loans and overdrafts. Unlike ay other limited companies or partnerships, it is not necessary to share decision-making or profits.
Disadvantages of Sole Proprietorship
The simplicity of this formation also has its own limitations. Unlike other forming a limited company, it lacks with a clear distinction between personal income and business income from the perspective of the tax authorities.
The owner of a business can be oneself liable for income tax and National Insurance contributions due for the business profits in every given tax year. They can be also oneself liable for any debts that the business is incurring. Business analysts might advise sole traders for forming a limited company to access greater levels of financing, for example, for expansion plans.
It can limit their liability; business lenders may be more inclined to co-operate with a limited company. It can also be the case to secure work if presenting within certain industries g potential business partners with a limited company structure.
The United States.
In the United States, no formalities must be followed for starting a sole proprietorship or commence business as a sole proprietor. However, it depends upon the business activity of the sole proprietorship, sole proprietors may require licenses and permits to conduct business.
According to the SBA (Small Business Administration), a sole proprietor and their business are considered the same; therefore, the business is not subjected to separate taxation and is regarded as the direct income from the owner. Income, losses, and expenses might be listed on a Schedule C, then transferred to the owner’s tax return. It is the control of the owner to ensure that all due taxes of income and self-employment contributions have been paid.
A permitted exception to the sole proprietor (like single owner) stipulation is made by the Internal Revenue Service (IRS), permitting the sole proprietor’s spouse to work for the business. They aren’t mentioned as partners in the enterprise, or an independent contractor by enabling the business to retain its sole proprietorship status, and it might not be require for submitting a partnership income tax return.
Foundation and development of Sole Proprietorship Examples
The process of setting-up of a sole proprietorship to comply with local laws and regulations is obtainable from the SBDC (Small Business Development Centre), by using their locator facility. A sole proprietor is needed to be prepared for devoting their time, utilizing business methods towards the establishment of a sound and appropriate foundation. Doing so might leads towards the contribution of the increased turnover, profits, taxes minimization, and avoiding other potential adversities.
Sole owners are also engaged in many varieties of industry and commerce, and it is having a comprehensive list of the primary categories which is found in the NAICS (North American Industry Classification System). In many instances, the selection of a business type by a new sole proprietor is motivated by appropriate business experience in a particular field, especially those about enterprises that are involved in the marketing and selling of defined services and products.
A critical component of a sole proprietorship within a business plan is to provide an inherent guideline for implementing actions for achieving growth. The business name and products can be critical aspects in the founding sole proprietorship and, once selected, should be protected. If a determined brand name is legalized, information regarding trademark protection is available from the U.S. Patent and Trademark Office.
For the sole proprietor, there are various options in obtaining financial support for their business, including loan facilities available from the U.S. Small Business Administration. The SBA does not originate the loans, but the administration guarantees loans made by various independent lending institutions.
This agency’s primary loan facility for small businesses is the 7(a) loan program, designed for general applications. Sole proprietors can finance legitimate operating expenses, for example, working capital, furniture, leasehold improvements and building renovations.
Many private organizations and individuals also seeks opportunities for investing and funding a business that might not be qualified for traditional financing from institutions, such as banks. For the sole proprietor who is seeking for taking advantage of this facility, various factors must be adhered to and understood for regarding the loan application.
The SBA (Small Business Administration) also advises that there are traditionally two forms of financing: Equity and Debt. For any small business owner who is seeking funding must consider that the debt-to-equity ratio of their enterprise. It means the interaction between the sum of dollars are borrowed and the financial dollars which are invested in the business.
The calculations are simple; greater the finance invested by sole proprietors in their business; easier the obtaining of finance! The SBA statistics show that most small enterprises favor limited equity financing, for example, friends and relatives.
According to the SBA, various private organizations prepared for funding sole proprietor business operations who are not qualified for traditional financing from banks. These private investors can also provide loans, credit lines, facility of leasing for equipment, or other forms of capital, for sole proprietorship that have exhausted resources of alternative finance.
It can be also possible for these owners to obtain financing through business partners in the form of cash to invest. Frequently Financial partners are frequently “silent,” and although they do not participate in any business-related decisions, they generally receive a percentage of the profits generated by the business.
Business grants are available from the Federal Government or private organizations to assist sole proprietors, providing certain criteria are met. To qualify for Federal grants, small businesses must follow with determined size of business and income standards.
For deliberation regarding various grant opportunities and as an individual sole proprietors can also apply for a grant. Local governments and state economic can also frequently develop agencies that make grants available for businesses that have been stimulated their local economies.
For applying for a loan, any sole proprietor, their personal and business credit history must be in order and up-to-date before starting the loan procedure. A personal credit report can be obtained from a credit bureau, for example, Equifax, Trans-Union or Experian. This action can be initiated by the owner of a business well before starting the process of borrowing.
The Small Business Administration also specifies that all credit reports in Sole Proprietorship Examples business which are received from any source should be carefully reviewed to ensure that all relevant personal details are correct. Other details in the report should also be closely examined, particularly that is related to the past credit obtained, from sources such as credit cards, mortgages, student loans, and details about how the credit was repaid.
Famous sole proprietorship examples in Malaysia
Computer Repair Services
Many computer repair businesses are run as sole proprietorships. While some business owners own commercial shops, others work remotely. Individuals are often the target audience for small computer repair businesses.
Run a Bookkeeping Business
Bookkeeping businesses cater to the financial needs and interests of other businesses. A bookkeeper records the company’s revenues, expenses, and other financial information in an accounting system. This provides accurate financial information for business owners. A bookkeeper’s financial records are used to prepare tax returns for a company.
Provide Home Healthcare
The Healthcare industry thrives in both bad and good economic times. This stability is what many sole proprietors want to take advantage of by starting their own home healthcare business. Many of these services are available to seniors. These services may include cleaning up after seniors, cooking, and other household chores.
Be a Financial Planner
As financial planners, sole proprietors offer their services to small businesses and individuals. They assist families in planning for retirement, saving for college expenses, and investing in securities. A business may need financial planners to help it set up its retirement plans and other benefits.
Run a Landscaping Company
Landscapers can work independently or with a small group of people. Landscapers care for the plants, trees, and lawns of businesses and homeowners. Many landscaping companies that work with commercial customers employ employees to help them complete their projects.
Run a Catering Company
Catering companies can provide their services for weddings, corporate events, and church functions. A single proprietor owns a majority of catering companies.
House cleaning Services
A housecleaning business usually has low startup costs. Business owners can offer many additional services, including laundry, window washing, and carpet cleaning.
You can be a freelance writer.
While some freelance writers work as contractors, others set up small publishing businesses. Freelance writers provide content for businesses or sell content to consumers. Freelancers are often able to provide press releases, sales copy, and website content, as well as blog posts.
Offer Tutoring Services
Students can get tutoring assistance from tutoring businesses in many subjects. Students can meet with tutors in person or via video chat. Many tutors have extensive teaching experience and knowledge in the subject that they teach.
Be a virtual assistant.
Virtual assistants assist entrepreneurs in managing their administrative tasks via the Internet. Virtual assistants can complete tasks based on the requirements of their clients. Some common tasks include creating spreadsheets in Excel, checking email, and typing documents.
Sole proprietorship, Partnership Company or a SDN BHD or Limited liability companies (LLC) these basically are the only three most popular company type of structures in Malaysia. Name of any sole proprietorship companies in India. Sole Proprietor Taxes. A Sole Proprietorship is mainly governed by name of Companies Commission of a Malaysia ( which is called Suruhanjaya Syarikat Malaysia) and which is Registration of Businesses Act 1956.
A sole proprietorship which is Starting a Sole Proprietorship/Partnership, a Agencies under a Domestic Trade and a Consumer Affairs Ministry known as (KPDNHEP), Companies which has Commission of Malaysia Corporate Responsibility ,
- Publication of a Best Business Practice Circular,
- A Corporate Communication & Strategy Division
- Skim Pendaftaran Perniagaan Prihatin (SPPP),
- Corporate and Business Information Data (e-CBID),
- Registration of a Businesses Act 1956 (ROBA 1956), Rules 15,
- Rules of Business Registration 1957,
- A Registration of a Business Act 1956 Validity type of Certificate of Registration which is Issued Using A4 Paper.
This fees will varies on depending on your type of company’s name. Sole proprietorships , by also Carry out the trade name Search process and submit in name proposal to the SSM of Sole Proprietor.
My Name is Nadeem Shaikh the founder of nadeemacademy.com. I am a Qualified Chartered Accountant, B. com and M.Com. having professional and specialize experience in field of Account, Finance, and Taxation. Total experience of 20 years in providing businesses solution in Taxation, Accounting, and Finance with all statutory compliance with timely business performance Financials reports. You can contact me on [email protected] or [email protected]