Pros and Cons of Sole Proprietorship
Understand what it is like to go into business for yourself. Before making that decision, consider the pros and cons of sole proprietorship.
When deciding whether to go into business for yourself as a sole proprietor or to partner with other business owners, you must consider the advantages and disadvantages of each. There are lots of benefits to working for yourself, but there are also challenges. It’s important to understand what it might be like to go into business for yourself alone without other business owners before making that decision. Let’s consider the pros and cons of sole proprietorship.
So how do you know whether you should go into business alone as a sole proprietor, or whether you should partner up with another person or a whole team? First of all, “sole proprietorship” by definition is a legal structure for a business, but it’s not the only business structure you could take on as a business owned by a single individual. For example, you could work for yourself as a solopreneur and structure the business as either a sole proprietorship or a limited liability company (LLC). For the purposes of this article, we are not focusing on the legal structure for your business, but rather: should you start a business alone, or in partnership with others?
Please note that there is no “one size fits all” answer for everyone. It’s not that sole proprietorship is better or worse than partnering up with other business owners. What will make someone successful as a business person is going to be very different for everyone based on their personality and knowledge base. That said, as you read this article, you might resonate with some points more than others. Take what applies to you and your business and set aside the rest.
Cons of a Sole Proprietorship
Let’s start with the cons of sole proprietorship. There are certain disadvantages of going into business by yourself that it’s important to know upfront before starting a business.
Lack of Delegation
When you’re sick or overwhelmed and you’re the only one running the show, there’s no one to delegate extra tasks to or to cover for you. When you are the only face of the business, unless you have developed a way to bring in a good amount of passive income—such as from on-demand information products—then you need to be working regularly in order to make money.
When you are in a partnership, the lights can stay on and the doors stay open when the going gets tough because you can tag team with each other and keep going. If it’s just you and you fall very ill or there is some other overwhelming situation, it could put a serious damper on your ability to make a profit.
Trickier Conflict Resolution
When it comes to running a business, you may have to cooperate with loads of other people, from customers and employees to suppliers and landlords. With all these different personalities you must interact with, there are bound to be some conflicts!
Some personalities work better together than others. If you have difficulties with someone and you are having a hard time resolving the problem, sometimes it’s best if you have a partner to perform a “good cop, bad cop” routine to smooth over any differences. Likewise, if you have a business partnership, one of you might decide you like working with others and the other would prefer to stay behind the scenes.
As a solopreneur, you do it all—like it or not—and there is no one there to handle difficult people but you. If hearing the words, “I need to speak to the manager,” make your skin crawl when you realize YOU are the only manager, then it’s possible being a sole proprietor isn’t for you.
You’ve heard of the saying, “Two heads are better than one.” When it comes to a sole proprietorship, you can miss out on the advantages that come from having a business partner, such as different ideas, perspectives, and solutions. Some business owners really thrive as a dynamic duo and are best not left to their own devices. If you feel like living in an echo chamber is your worst nightmare, then perhaps life as a solopreneur is not for you.
When you feel like you can’t solve a problem on your own, you might have to shell out the big bucks and hire a professional consultant to get you out of a jam that could possibly have been solved by having a savvy business partner.
Pros of a Sole Proprietorship
Now let’s focus on the pros of sole proprietorship, and why this type of business might be for you. Some people know what they want in business and they feel confident and savvy enough to pull this off without a business partnership. Is sole proprietorship for you? Let’s find out!
No Compromising Your Ideas
When you feel like you have the most genius idea of the century, the last thing you want to do is to have your inspiration and brilliance watered down by conflicting advice and ideas coming from a business partner. If you feel like, “I can create my own success, thank you very much,” then perhaps sole proprietorship is for you.
If you are a control freak and you know it, and you want everything executed “just so”—from your website design, to the interior of your store, then it’s highly possible that a business partnership would be more irritating than useful to you. You need to understand where you stand when it comes to collaborating with other people when it comes to business. If you are delighted to compromise your ideas to accommodate the ideas of others, then a partnership might be best. But if someone else pitching in their two cents sounds like fingernails on a chalkboard, then you might be better off as a sole proprietor.
Set Your Own Hours
When you partner with someone else, there is always going to be some sort of negotiation that happens around scheduling. As a sole proprietor, you create and set your own hours—no ifs, ands, or buts. If you are someone who has a strong desire to control your own hours without having to deal with someone else’s wants and needs, then you might be better off as a solopreneur. If you wake up in the middle of the night with a stroke of brilliance, and you want to get straight to work executing on your idea without having to ask permission or consult with a business partner, then a sole proprietorship might be right up your alley.
No Conflicts With Other Owners
Just like marriage, sometimes there are “irreconcilable differences” between business partners and people decide they cannot continue together in business. In that case, you might have to dissolve the business and divvy up all the assets. Consider what it might feel like to allow one person to walk away with some of your business assets so that you can go your separate ways. As a solopreneur, this heart-rending situation will never become a concern.
Even if a conflict never gets so far as to destroy the business, just know that going into business with other people will always bring chances for conflicts and differences. As a sole proprietor, the only conflicts you’ll have to iron out when it comes to business decisions are with yourself!
Profits Are All Yours
As a sole proprietor, you will often be the only one securing the capital necessary to start your business, which can be a con. But the major upside to this is that you will be the one reaping all the profits. If it skins your hide to share profits with other business owners, then perhaps being a sole proprietor is the right path for you. When the money comes in, it goes straight into your pocket and you can choose to spend it however you please. With business partners in the mix, you might need to compromise how you spend profits, whether you get paid or whether you reinvest in the business. If you hate to negotiate with others on what to do with profits, then you should strongly consider becoming a solopreneur.
As a solopreneur, you own both your success and your failures, and you alone are responsible for your business. For some business owners, this sounds refreshing; for others, it sounds daunting. Decide which kind of entrepreneur you are.