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Benefits vs Drawbacks of Registering as a Sole Proprietor

Home » Blog » Benefits vs Drawbacks of Registering as a Sole Proprietor

Benefits vs Drawbacks of Registering as a Sole Proprietor

October 13, 2021

Benefits vs Drawbacks of Registering as a Sole Proprietor

Benefits vs Drawbacks of Registering as a Sole Proprietor

Benefits of a Sole Proprietorship

Sole Proprietorship is the most popular form of business registration in the Philippines. Here are some reasons why many entrepreneurs choose this business entity type:


Easy to Set Up

  • Registering a sole proprietorship is relatively less complicated than registering a corporation or partnership.
  • Most of the steps can be accomplished by the sole proprietor without external assistance.
  • Sole proprietors do not need to endeavor the tedious process of maintaining good relationships with co-directors or business partners.
  • There is no need for complicated ownership structures, board meetings, and no complex accounting processes to accommodate multiple shareholder requirements.


Minimal Capital

  • Registering as a sole proprietor is relatively more affordable than other types of business structures.
  • The fees are minimal, and the wait for registration is usually on the shorter side.
  • This is a great business structure option, especially for people who are endeavoring on business ownership for the first time.


Total Control Over the Business

  • Having several business partners increases the chance of getting into  disagreements about how to run the company.
  • With a sole proprietorship, the business owner can do away with consulting multiple partners before making an executive decision. He or she has total and complete control over the trajectory of the business.
  • Making decisions is a lot less complicated and swifter if only one person decides for the entire company.


Flexible Hiring Options

  • Registering as a sole proprietorship is ideal for family-run businesses.
  • A sole proprietor can “employ” the service of a family member without registering as an employee. Sole proprietors get to enjoy a wide array of tax benefits because of this perk. 


What are the Drawbacks of a Sole Proprietorship?

As with every aspect of a business, there are some drawbacks to registering as a sole proprietor. 

  • Most of the disadvantage revolves around the issue of separating personal and business assets and liabilities. 
  • There is no clear line between personal and business income.
  • Lawsuits against the business are also considered lawsuits against the sole proprietor.
  • Personal assets can be used to pay damages in cases wherein the lawsuits are successful. 
  • Sole proprietors cannot raise capital by selling shares in the business, nor are they allowed to procure capital funding from traditional channels. 
  • A sole proprietorship business is usually not eligible for a business loan from most banks.


Need help in registering a Sole Proprietorship, Partnership or Corporation? We can help. Reach out to us via our website’s contact form today!