What is a Sole Proprietorship?

The owner can become personally liable for the debts of the sole proprietorship since there is no legal distinction between the owner and the business. If a creditor sues the business because the business owes them money, they can reach the owner’s own personal property in a lawsuit.

A sole proprietorship is the most straightforward structure for a business wherein the decision-making power is in the hands of the owner.

A sole proprietor needs to register with FBR for National Tax Number (NTN) and Sales Tax Number (STN).

It is mandatory for an establishment having 5 or more employees, to register with Social Security.

• Sole Proprietorships are easy to start up.
• Sole Proprietorship is subject to fewer regulations relative to other types of businesses.
• Owner has full autonomy with regard to business decisions.
• Sole Proprietorship is easy to discontinue as well.
• One owner takes all the profits of the business.
• The quick decision-making process and doesn’t have any opposition when making a decision as the owner has total control of his or her business.
• It’s easy to set up, with little paperwork to fill in and little money spent on setting up, this is one of the easiest types of business to start.

• The sole Owner/Trader is personally liable for all debts.
• Personal property may be vulnerable to debts, other business liabilities and/or revenue department payments.
• Large sums of capital are less likely to be available to a Sole Owner/Trader, and the Sole Owner/Trader may have to rely more on overdrafts and personal savings. Thus increasing his or her cost of borrowing and less rate of return.
• The sole Owner/Trader is the only person standing to bear the losses.