Starting and running your own business can be the best way to earn a living. However, it requires passion, sacrifice, and persistence to build a successful business.
There are several forms of businesses you can establish, and the most common one is a sole proprietorship and it might be the one that’s fit for you. To start operating a sole proprietorship business, you must first register it with the registrar of companies.
This article will walk you through all that you need to know about sole proprietorship businesses. Some of the things you’re going to learn in this post include what a sole proprietor is and how to register a sole proprietorship. Read on.
What Is A Sole Proprietorship Business?
A sole proprietorship is also known as a sole tradership or individual entrepreneurship. It’s a form of a business owned, managed, and controlled by one individual—thus, the term ‘sole.’ The owner of a sole proprietor business pays personal income tax out of the business profit.
Unlike other forms of businesses such as partnerships, corporations, and limited liability companies, a sole proprietorship isn’t separate from the owner. This means that the owner and the business are considered the same entity—unlike a corporation that’s treated as a different entity from its owners.
Because of that, any debts that the sole propriety business will incur can be considered as its owner’s debts as well. Also, the owner signs business contracts under their name because their business has no separate legal identity.
What Are The Benefits Of Establishing A Sole Proprietorship Business?
Of all the business structures, a sole proprietorship is the simplest and offers several convenient benefits. Some of these benefits include the following.
1. Easy To Establish
As noted earlier, a sole proprietorship is one of the easiest forms of business to start. This is because it has minimal legal requirements. For instance, the law doesn’t require you to notify the federal or local authorities when establishing your business. You only need to register it by paying the required registration fee. After that, you can legally run your business. This means that, with a sole proprietorship business, you can save a lot of money on registration fees.
A sole trader business offers a lot of flexibility you couldn’t find in other forms of business. In one, you can make any change you want at any time. For instance, you can decide to change your business policies when you want to. You can even change the business to a partnership or corporation without much hassle.
Also, the process of making decisions in a proprietorship business is much faster than in other forms of business. After all, you’re the sole decision-maker and don’t need any consent or approval from any other person.
3. Simpler Taxation
Unlike other businesses structures where you can pay tax twice, owners of sole proprietorships are taxed only once. They pay personal tax on profits generated from the business. The business itself doesn’t pay tax.
What Are The Steps Of Registering A Sole Proprietorship Business?
So, if you’ve decided to register a sole proprietorship business, here are the steps to follow to register it.
1. Secure A Business Name
Securing a business name is the first step when registering a sole proprietorship business. Though most sole trader businesses are usually registered with the owners’ name, you can search online to see whether another company registered with a similar name.
If there’s another business with a similar name as yours, you can make some minor adjustments or alterations to make your name appear unique. This will help avoid confusion between your business and other firms in the region.
2. Gather Relevant Details
Before you register your sole trader business, you’ll be required to gather the necessary information to be fed on the business registration form. Some of these details include the business suggested name, physical and postal addresses, nature of business, your name, and other personal information.
3. Business Name Approval
If the registrar of companies is satisfied with the nature and objectives of your business, they’ll approve the business name you submitted. Once your name is approved, you can continue the next steps to register your business.
4. Submit Your Business Registry Request
After your business name approval, you need to fill the registration form with the relevant information and submit it to the registrar of companies. You can either do your registration online or personally take your documents to the registrar of company’s offices. After that, you can wait for your registration to be approved.
5. Get Registration Certificate And Other Permits
Once approved, you need to get hold of the registration certificate and other business permits. These certificates and permits indicate that your sole trader business is legally registered and allowed to operate. After getting these certificates, you can now open your business.
A sole proprietor is the simplest type of business you can consider establishing. It requires little capital and has fewer legal formalities. Though sometimes registering a sole trader business can be stressful, with the right information, the process can get simpler. For that reason, you need to start by searching for your business name, gather relevant details, and then register your business.