If you should check business and industrial statistics, you will observe that sole proprietorship kind of business dominates the list. In fact, sole proprietorship is the most preferred business entity utilized mostly by small business owners. They love the concept of their business being named after them. For example, Martins’ Snacks, Cynthia’s Restaurant, Smith’s Gift shop and so on.
I dislike the sole proprietorship kind of entity because operating under this entity shows you lack business and financial intelligence. I want to stress that i am not against the small business owners but the truth must be told. Smart, successful entrepreneurs hate running their business using the sole proprietorship entity for certain reasons which i am going to share with you.
Below are reasons 3 why smart entrepreneurs don’t operate a sole proprietorship kind of business:
1. In a sole proprietorship kind of business, you are the sole owner. You might think you are building a business but in reality, you are building a job. And if you still claim to be building a business, i will tell you the bitter truth, you are not. Why? because you are the business. If you take a leave or vacation for maybe five months, there will be no business left to return to.
To know if you are truly building a business, ask yourself this question. Can my business operate smoothly without my presence? If it can, then you are building a business but if not, you are the business. Period.
2. As the sole owner of a business, your business losses and liabilities are your personal loss and liability. The point i am trying to stress is this; if eventually your business fails, your creditors can come after your personal assets. You will not only lose your capital invested but also your personal properties.
To me, i think it is insane and too risky. Entrepreneurs are known to be risk takers but not this type of risk. In fact, this is not risk, it is stupidity.
3. Raising capital for a sole proprietorship business is extremely difficult. Most solely owned businesses operate without financial statements and banks don’t lend money without these documents. If the banks decide to lend money to you, you will have to put up your business and personal assets as collateral.
In conclusion, i believe i can make more money using other form of entities such as limited liability, limited partnership and corporation. Making money with other people’s money and pre-tax dollars is not applicable to a one man’s business.
Besides, growth and expansion is limited when you are operating a solely owned business and the most dangerous part of it is this; operating a business using this type of entity make you a potential prey to attorneys and law suites.
At this stage, i draw the curtain. I wish you all the best.
