A small business owner who opts for a sole proprietorship will have greater freedom, but will also have greater financial liability.
Advantages
- Great freedom in managing the company
- Capital requirements: at least in theory, a sole proprietorship can start doing business without any start-up capital. In reality, a minimum amount of seed capital will be needed
- Taxes: profits will not be taxed twice because all business income and loss are reported on the sole proprietor’s personal income tax return. In this respect, owners of sole proprietorships have an advantage over corporations
- Establishing the sole proprietorship: no formalities, low fees (only if registering in the trade register turns out to be necessary)
- Administrative costs are lower than for an SARL or SA
Disadvantages
- Liability: the owner is held liable up to the amount of both their business and private assets
- The owner’s name is known (not the case for an SA)
- Company name: cannot be chosen freely—the owner’s name must be part of the company name
- Balance sheet requirements: sole proprietorships registered in the trade register are required to keep accounts, but the accounting criteria are not as strict as for SARLs and SAs
- Taxes: no separate taxation on income/business and personal income. Disadvantages due to the progressive tax rate since the total amount appears on the private tax return
- Owner liability only
- Bankruptcy proceedings: a stringent procedure for debt collection, the purpose of which is the forced sale of all the debtor's assets (if the company is registered with the trade register)
