Pros and Cons of Owning a Sole Proprietorship

One of the main decisions that have to be made when opening a business, is the business-type. The two most popular types of businesses are sole-proprietorship and franchises. For those are unfamiliar with SPs, here’s a small recap.

A sole proprietorship is a business owned by an single individual or family. These types of business are your mom-and-pop stores that are unique to each area. They’re often are smaller in scale with a few locations at most, and are usually pretty specialized for the area, (If you’d like to learn more about the four different main types of business, check out our article on the best kinds of businesses.).

Without further ado, let’s discuss the advantages and disadvantages of owning a sole-proprietorship.

Pros:
High Reward Potential
More Freedom
No Fees or Royalties beyond taxes

SP’s, (Sole Proprietorships) are often referred to a “High Risk, High Reward” type of business. If the business takes off and does well, you don’t have to share the profits with anyone else. On the other hand of things, however, if the business fails miserably, you only have yourself and bad luck to blame. For better or for worse, that business is completely in your hands do to with it what you can.

Cons:
High Risk for failure
No Initial Brand Recognition

Unfortunately, SP’s often times don’t come with professional counsel, training, or support from other experts either, so it can be easy to make mistakes as a business owner. SP’s can be more difficult and take longer to turn a profit on due to their low brand recognition, and require huge amounts of marketing to do well initially.

SP’s can either go fairly well, or pretty poorly, while each industry is different as far as risk goes, these businesses are known for being the most difficult of the four types to build and manage long-term.  It’s typically not recommended for new investors to open a SP on their own, but many have still succeeded doing so.

For those that want a safer option, franchises are usually the way to go, especially for those newer to the investment world.

If our article caught your interest, or the idea of opening a franchise excites you, please reach out to us via the form below so we can talk.
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Pros and Cons of Owning a Sole Proprietorship
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