Consider these 3 things BEFORE deciding to trade as a Sole Proprietor
If you're testing out a business on your own and it's a service-based business that doesn't need much initial financial investment, then trading as a sole proprietor might just be the thing for you.
The advantages of trading as a sole proprietor include:
· Not having to always submit Annual Returns to CIPC;
· Not having to use a registered accountant to do your books or have a full audit done;
· Lower start-up and administrative costs; and
· There's no formal registration process to trade as a Sole Proprietor.
Yes, there are various advantages to trading as a Sole Proprietor. But there are also things to consider.
Here are 3 things to consider before deciding to trade as a sole proprietor:
The risks you take are in your personal name. And your personal assets could be at risk if you can't pay your creditors.
If an employee acts in a negligent or malicious way, SARS could hold you personally liable for any damages. And, if someone gets hurt on your premises, you could also shoulder the liability.
There's no continuity if you trade as a Sole Proprietor. This means if you pass away, your business will terminate and all your business assets and liabilities will be included in your deceased estate.
It's worth noting that, even though you don't have to register your trade name with CIPC, it's a good idea to apply for a name reservation with CIPC. This is so your trading name is available for if you decide to incorporate your business into a company.
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