Setting up a small business as a sole proprietorship is a good idea for various reasons. Firstly, it reduces the involvement of the government in the process. That means it becomes easy to establish and run the business (Merritt, 2019). Secondly, beginning as a sole proprietorship allows the owner to develop business management and other related skills that would be crucial in running a bigger entity. Lastly, a sole proprietorship can form a basis for growth as one can easily transition to a limited liability company. Therefore, starting a small business as a sole proprietor has numerous benefits.
There are three main types of forming a business, each having disadvantages and advantages. The first one is a sole proprietorship, which a single individual owns. Its benefits include minimal government regulation, less paperwork, and simplified business management. However, the demerits are difficulty sourcing for finances and lack of liability protection (Merritt, 2019). The second type of business is a partnership, an entity two or more individuals own. Partnerships have the benefits of simplicity, less paperwork involved, and quick decision-making. Nonetheless, the disadvantages of partnerships include future selling complications, loss of autonomy, and unlimited liability. The last type of business is a corporation, which is an entity owned by shareholders. Its benefits are limited liability, easy transfer of interests, and lower tax rates (Merritt, 2019). The downsides include taxes on profits and strict legal formalities. Therefore, if I were to set up a small business, I would choose sole proprietorship since it is easy to establish, run, and transition to limited liability.
I do not think it is fair for small business owners to avoid personal liability of their business. It is because most small businesses are sole proprietorships owned and run by a single individual. In that case, the business and the owner are inseparable. That means if the business incurs a liability, it directly affects the owner. Overall, every business has its advantages and disadvantages that one needs to understand before choosing.
Reference
Merritt, C. (2019). Advantages & disadvantages of each of the three key methods of forming a business. Hearst Newspaper. Web.
