Sole Proprietorship in simple words is a one-man business organization. It is the type of entity that is fully owned and managed by one natural person known as the sole proprietor. The business and the man are the same; it does not have a separate legal entity.
A sole proprietorship usually does not have to be incorporated or registered. It is the simplest form of business organizations.
Advantages of Sole Proprietorship
- A proprietor will have complete control of the entire business; this will facilitate quick decisions and freedom to do business according to their wishes
- Law does not require a proprietorship to publish its financial accounts or any other such documents to any members of the public. This allows the business a great deal of confidentiality which is sometimes important in the business world
- The owner derives maximum incentive from the business. He does not have to share any of his profits. So the work he puts into the business is completely reciprocated in incentives
- Being your own boss is a great sense of satisfaction and achievement. You are answerable only to yourself and it is a great boost to your self-worth as well
Disadvantages of Sole Proprietorship
- One of the biggest limitations of a sole proprietorship is the unlimited liability of the owner. If the business fails it can wipe out the personal wealth of the owner as well and affect his future business prospects too.
- Another problem is the limited capital a sole proprietor has access to. His own personal savings and money he can borrow may not be enough to expand the business. Banks and financial institutions are also wary lending to proprietorships
- The life cycle of a sole proprietorship is undecided and attached to its owner. If the owner is incapacitated in any way it has a negative effect on the business, and it may even lead to the closure of the business. A sole proprietorship cannot carry on without its proprietor.
- A sole proprietor also has limited managerial ability. He cannot be an expert in all the fields of the business. And limited resources may mean that he cannot even hire competent people to help him out. This may lead to the business suffering from mismanagement and poor decisions.
Documents Required for Sole Proprietor Registration:
- CNIC of the Person Applying for Sole Proprietor Registration.
- Name of the Business.
- Address of the Business and utility bill for address verification (also require property documents or rental agreement in case property in on rent)
- Letter Head and round stamp of the Business.
- Electricity Bill of the Address.
- Bank Account Number, Bank Name and Branch, bank account maintenance certificate.
There is no official certificate issued by any authority in case of a sole proprietorship. You will only receive a NTN certificate with your name & details on it.
Hyder Shar Law Associates is able to assist its valuable clients to start their new business by way of establishing the proprietorship firm.
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