Establishing a company can be very hard, especially if you are the only one managing it. Keeping on top of the operations, as well as in the backend, can be very tiring and at the same time, limiting to the growth of your business. Now, you may be thinking of moving on from sole propriety to something grander, but with a caveat – entrusting some part of your business to another person or a group.
So, when would be the best time to move from sole proprietorship? This article will discuss it to you.
Engaging with Several Business Entities
While in certain circumstances, a sole proprietorship is more suitable. It is very limited and rarely advisable as a business model especially when you start transacting with other businesses.
Being a sole proprietor can help you jumpstart everything, But as your business develops, the boundaries set by sole proprietorship becomes more obvious – one of the most relevant disadvantages is having the entire personal liability for the debts of your business.
When Business Affects Your Personal Financial Capacity
Having business gains and losses pass through your personal assets, personal liability can provide disastrous outcomes, even with the possibility of benefits in terms of tax returns. Personal assets of a sole proprietor are not shielded, unlike corporations or LLCs. Thus, a sole proprietor is both liable for debts through his company and personal finances.
For example, if business suddenly becomes bankrupt or owes liability for an unfortunate event caused by the business – not only the company will be dissolved, his personal assets like his home or other properties can be in jeopardy. This is risky and one can have a tough time if corporate models do not have protected personal assets.
Additional Funding is Necessary
Starting with sole propriety is practical for a lot of businesses as they provide control and simplicity in structure. But this is the same risk that can be hard to ignore – as stock cannot be sold, it would be difficult to acquire additional funding.
When is the best time to move from a sole proprietorship to partnerships? Basically, it would be when your business is peaking and might need help from expert business owners and people you could trust. This is in the hopes of expanding and growing your business. Once you are ready to take the giant leap, it would help if you have skilled people who can help you determine your options and choose the best from the lot.
Developing your business? Need help with your business startup? Need extra motivation to start on your own? Contact Forward Progression Development or call us at 888-537-9915