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Casual Articles - The Top 5 Reasons to Avoid Sole Proprietorship
With all of the recent data theft in the financial sector, it is important to make sure that we don't go crazy trying to protect ourselves from risk. Risk management does have a value but this value lies mostly on the front end. Reactionary risk management almost always produces a point at where the value of protecting oneself or one's customers overshadows the product or service that you are offering. The majority of companies always go beyond this point, some thinking they can even sell it to the customer as a security measure and build their brand with it.This is a lazy and terribly detrimental course of action for any corporation to undertake.I r
Cloud #3: You may lose business opportunities.
Larger co
The senior flight attendant on the WestJet flight was starting the routine safety talk: the bit about flotation vests and emergency exits that we ignore at the beginning of every flight.“If we could have your attention, please, we would appreciate it - in fact we’d be downright shocked,” she said. The passengers and the rest of the crew laughed along with her and then, having captured our attention, she went on with her instructions.That event, on my second flight with the airline, may have been the point when I became a fan of this upstart, discount carrier. The flight attendant’s small joke was just one of many good-spirited remarks I heard from stat
Well, it's a law of nature and balance that for every yin, there's a yang; every action breeds a reaction; every silver lining has a cloud. And the "clouds" hanging over a sole proprietor can create a deluge of catastrophic proportions.
Cloud #1: You risk the whole ball of wax.
One of the benefits of doing business as a limited liability entity (such as a corporation or limited liability company) is that the structure (that's so unwieldy to the sole proprietor) acts as a protective fortress against personal liability. Sole proprietors don't have that shield of protection. As a result, all of their personal assets are at risk in the event of a lawsuit or judgment. Personal assets, like your home, bank accounts, savings, car, jewelry (which can be sold to pay off a judgment). How remote is a judgment against you? For the computer consultant whose network configuration inadvertently crashes the server? The graphic designer whose design may have infringed on someone else's? The independent sales rep accused of misusing a company contact list? The marketing consultant whose plan did not produce the promised results? In a suit-happy society, sole proprietors often don't have the "war chest" to fund a lawsuit--or pay off a judgment. So why put Grandma's engagement ring, or your life savings, at risk? It's like jumping into a pool of hungry sharks: you may not get eaten, but why would you want to put yourself in that danger in the first place?
Cloud #2: A house of cards crumbles easily.
Erratic economies, slow- (or non-) paying clients, or lawsuit judgments noted in Cloud #1 can all contribute to the demise of a business. Limited liability entities have the option to take the business through a bankruptcy proceeding, without it having to affect the business owners. But with sole proprietors, the business is the owner. The two are inseparable--nay, identical. Therefore, harm to the business equals harm to the sole proprietor. If a sole proprietor is seeking a way out through bankruptcy, she must declare personal bankruptcy. Bankruptcies can stay on your credit record for 10 years and even longer, so the fresh start that the bankruptcy process is supposed to provide may turn into a millstone around your neck... for over a decade.
Cloud #3: You may lose business opportunities.
Larger com
A business owner is thoroughly responsible for their own financial survival and possibly the financial survival of their employees. Business owners, for the most part, seem to be "risk takers", who really don't easily "go with the flow". They are inventive and somewhat confident, as just having their own business does mandate that they possess these qualities.However, the ability to live with risk is very much a personal issue. Some business owners can live with more risk than others and some can manage the risk better than others.Having the ability to effectively manage risk is imperative for a successful business venture. Therefore business owners ne
Cloud #1: You risk the whole ball of wax.
One of the benefits of doing business as a limited liability entity (such as a corporation or limited liability company) is that the structure (that's so unwieldy to the sole proprietor) acts as a protective fortress against personal liability. Sole proprietors don't have that shield of protection. As a result, all of their personal assets are at risk in the event of a lawsuit or judgment. Personal assets, like your home, bank accounts, savings, car, jewelry (which can be sold to pay off a judgment). How remote is a judgment against you? For the computer consultant whose network configuration inadvertently crashes the server? The graphic designer whose design may have infringed on someone else's? The independent sales rep accused of misusing a company contact list? The marketing consultant whose plan did not produce the promised results? In a suit-happy society, sole proprietors often don't have the "war chest" to fund a lawsuit--or pay off a judgment. So why put Grandma's engagement ring, or your life savings, at risk? It's like jumping into a pool of hungry sharks: you may not get eaten, but why would you want to put yourself in that danger in the first place?
Cloud #2: A house of cards crumbles easily.
Erratic economies, slow- (or non-) paying clients, or lawsuit judgments noted in Cloud #1 can all contribute to the demise of a business. Limited liability entities have the option to take the business through a bankruptcy proceeding, without it having to affect the business owners. But with sole proprietors, the business is the owner. The two are inseparable--nay, identical. Therefore, harm to the business equals harm to the sole proprietor. If a sole proprietor is seeking a way out through bankruptcy, she must declare personal bankruptcy. Bankruptcies can stay on your credit record for 10 years and even longer, so the fresh start that the bankruptcy process is supposed to provide may turn into a millstone around your neck... for over a decade.
Cloud #3: You may lose business opportunities.
Larger co
Successful entrepreneurs learn early in their careers that good people make good things happen. When most of us start out in our own businesses, we think that money is the key to making a business successful. To some degree it is -- certainly if there is enough money things are easier, but money alone is not the answer.The validity of this statement can be found in every conversation you will have with rich, successful business people. I've had the good fortune to know several and to have met with many more. I don't think I can recall any conversation I ever had that either began or shortly after getting started didn't include the following questions."
Cloud #2: A house of cards crumbles easily.
Erratic economies, slow- (or non-) paying clients, or lawsuit judgments noted in Cloud #1 can all contribute to the demise of a business. Limited liability entities have the option to take the business through a bankruptcy proceeding, without it having to affect the business owners. But with sole proprietors, the business is the owner. The two are inseparable--nay, identical. Therefore, harm to the business equals harm to the sole proprietor. If a sole proprietor is seeking a way out through bankruptcy, she must declare personal bankruptcy. Bankruptcies can stay on your credit record for 10 years and even longer, so the fresh start that the bankruptcy process is supposed to provide may turn into a millstone around your neck... for over a decade.
Cloud #3: You may lose business opportunities.
Larger co
Every business sooner or later will be sold or transferred to someone else. Whether that someone else is an insider (e.g., a family member or key employee) or an outsider, certain steps can be taken to ensure that the transfer achieves the goals of the business owner. This process is known as exit planning. Unfortunately, the majority of business owners do not take the proper steps to maximize the proceeds they’d receive upon the sale of their company and/or achieve their overall objectives.Set goals for yourselfYou may have put together a business plan when you started or acquired your business, but how often have you updated it? I’d recommend
Cloud #2: A house of cards crumbles easily.
Erratic economies, slow- (or non-) paying clients, or lawsuit judgments noted in Cloud #1 can all contribute to the demise of a business. Limited liability entities have the option to take the business through a bankruptcy proceeding, without it having to affect the business owners. But with sole proprietors, the business is the owner. The two are inseparable--nay, identical. Therefore, harm to the business equals harm to the sole proprietor. If a sole proprietor is seeking a way out through bankruptcy, she must declare personal bankruptcy. Bankruptcies can stay on your credit record for 10 years and even longer, so the fresh start that the bankruptcy process is supposed to provide may turn into a millstone around your neck... for over a decade.
Cloud #3: You may lose business opportunities.
Larger co
Your Guide to Navigating the Road of WorkDo you feel that your life is an express lane and you are driving blindly? Ever feel that way about your career? You spend most of your waking hours on the thruway of work. Are you one of many people who are working in a job they are not satisfied with? Some wonder how they got where they are in the first place; did they somehow miss a turn along the way? Many have lost their passion for work altogether, they arrive each day on cruise control and return, gas tank emptied at the end of the day.Wish you had a AAA road map to guide you through your journey? Ever want to make a U-turn or take a more scenic route? Li
Cloud #3: You may lose business opportunities.
Larger companies like to use independent contractors because they do not have to pay Social Security and Medicare taxes on their behalf. Yet, consulting assignments, although temporary positions, can last for months or even years! If that happens, a consultant/contractor could look dangerously like a part time (or even full-time) employee. As a result, an increasing number of companies will only do business with consultants who operate their businesses as limited liability entities, for the limited liability form lends a certain presumption that the business truly is independent. Is this form over substance? Not if sole proprietors are missing out on attracting larger and more prosperous clients.
Cloud #4: You curtail business expansion opportunities.
One of the most significant ways for a small business to expand is to bring in other business owners because they can contribute capital, contacts, and cheap labor. But you cannot have more than one owner in a sole proprietorship: by definition, it's "just you." Therefore, bringing in a business owner essentially means that you must create a new business... literally, as a new entity will have to be established. However, if you already have a limited liability entity, you can control who joins you and on what terms. In short, it can remain your business, only bigger and better.
Cloud #5: You risk thinking small.
There's no law that says your have to want to be a millionaire if you go into business for yourself. You may be quite content with remaining a one-person operation. But just as putting on a suit to go to that important client meeting (or special date) makes you feel and act differently, so too can having a limited liability entity help formalize your thinking and enable you to run the business smoothly, instead of running from pillar to post. There's a lot to know about running a business well--much of which has to do with understanding financial statements and what makes your business profitable. For the same 168 hours per week, wouldn't you rather make more money than less?
As you can see, there are lots of significant factors that can cloud the life of a sole proprietor. But you also have options to hedge against their risks. Don't make this decision alone--be sm
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