Most of us have skills and abilities that we hope to someday use to make money. Maybe you want to start an online business, or maybe you are doing some freelance work as a part-time job. When you start a business, you may hear different terms that describe the type of organization: sole proprietorship, partnership, independent contractor, or corporation. These different options may seem confusing. But don’t worry, This article will explain what a sole proprietorship is and how to register one.
A sole proprietor is a business owned and operated by one person. It has the simplest business structure. It has a few legal requirements. The business is not incorporated and so the owner is responsible for the debt and liability it incurs.
Advantages of a Sole Proprietorship
1. Quick and easy to form.
Sole proprietorships are fast and easy to start up and there are few legal requirements.
2. Taxes and fillings.
Sole proprietorships are generally easier and less expensive to file taxes for than other types of businesses. As a sole proprietor, you report all your business income and expenses on your income tax return.
3. Complete Control.
As a sole proprietor, you have complete control of the business. You can make all the decisions related to the business. You get to keep all the profits.
4. Decision-making is fast.
Being the only business owner makes it quicker to make decisions, as opposed to having to consult other shareholders.
Disadvantages of a Sole Proprietorship
1. Unlimited liability.
A sole proprietorship does not have limited liability because you and your business are one. Your assets are at risk if someone sues the business.
2. Personal Tax rate.
Your business is taxed at the personal level, which is higher than a company tax.
3. Limited growth.
If you intend to grow the business, the options are unfortunately limited for sole proprietors. Given the limitations, businesses that want to grow in the future tend to incorporate.
4. Difficulty raising capital.
Sole proprietorships are too risky for the bank to lend them money. The main reason is that they do not have limited liability like other business structures.
Requirements to Register Your Sole Proprietorship in Botswana
There are some things you may want to consider when setting up your business:
1. Choose a business you can deliver on. The desire to start your own business and decide on what it is.
2. A business name. This could be your name or a unique business name.
3. Open a business account for you to trade with.
4. The applicable trading licenses for your type of business.
5. A good-looking website. A website is optional but a big advantage.
In Botswana, registering a sole proprietor is done with the Companies and Intellectual Property Authority (CIPA). It a smooth and easy process. You fill in a form with a unique business or trading name, then the CIPA system will confirm that your business name is available. What is required is that you register your business under the category of business name.
Once your trade name is approved, you have 3 months to appoint a company secretary.
When to incorporate your sole proprietorship
A sole proprietorship is quick and easy to start. But if you want to grow your business and attract financing, you have to incorporate your business.
Incorporation makes your business a separate legal entity and thus lowers your personal risk. This also makes it easier for you to access funding opportunities.
Whether you are thinking of registering a sole proprietorship or incorporating your business, we can help.