Sponsored Links
Let’s now review the three common business entities: Sole Proprietorship, Partnership and Corporation. In the US, there is one additional entity called LLC or Limited Liability Companies but since this is not applicable here in Philippines, let’s skip that for the moment.
Let’s go first with the most common – Sole Proprietorship. “Sole”, as the word implies means “one” – you are the only sole owner of your business and you don’t have anyone to share your profits or losses.
Kiyosaki said that this is not the entity of business that he can recommend. As a sole proprietor, all you need do is decide the nature of your product or service, advertise, and start plying your trade. You won’t have to deal with complicated legal documents or hire expensive legal advisors.
Sometimes paperwork is still required for sole proprietorships, so make sure you check with the proper local government entities and obtain any necessary documents. For example, you may need a business license or a Mayor’s Permit. Relatively speaking, the legal matters associated with establishing a sole proprietorship are simple and straightforward, things you can tend to yourself. However, this is a very risky way to start a business.
Rich Dad Tip:
“The important word in sole proprietorship is sole. You alone are responsible and liable. Do you want your personal assets put at risk if there is a problem with your business?”
Is a sole proprietorship for you?
Sole proprietorships offer people the opportunity to run their businesses as they see fit, with minimal intrusion from the government. You are the sole owner, and decisions and profits are all yours. The sole proprietorship requires little paperwork and is the simplest business entity to operate. Moreover, if you decide to discontinue your business, no one else need be consulted: Pay off your debts, liquidate your assets, and close up shop.
A sole proprietorship is ideal for people like freelancers and consultants who want to keep their businesses small and their staffs limited. If you intend to bring in partners or you need investors, the sole proprietorship won’t work because it precludes anyone else from owning equity. Nor is the sole proprietorship ideal if you have reason to be concerned about liability. As a sole proprietor, you are personally liable for all the debts your business incurs. All of your personal assets are also at risk because you choose to operate as a sole proprietor. Liability can be a big drawback.
As they say: “Two heads are better than one”.
Source: Robert Kiyosaki’s Coaching Program
To get articles, you can subscribe using your favorite RSS feed reader or have them delivered directly to your email address
What To Read Next
- Pros and Cons of the three Business Types
- Overcome Fear in Investing
- Business Entity: Corporations
- Business Entity: Partnerships
- Two Types of Business Financing
This entry was posted on Monday, October 26th, 2009 at 8:54 am and is filed under Entrepreneurship. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Entries (RSS)
can the sole proprietorship business become big? I ask because I like to have an sole proprietorship business. This kind of business more fit for me in my opinion, but of course i need it to be big someday.
[Reply]
Tyrone Reply:
October 26th, 2009 at 11:30 am
Yes, sole proprietorship can also be big. But as you become big, you need more capital and more resources. Most probably, you would expand and that’s where you would need investors in the form of equity holders and business partners. Eventually, you would need to convert it either to partnership or corporation.
[Reply]
Although sole proprietorship is complicated, it still the best way to earn income. Tyrone is right. Once your business grow you’ll need a lot of capital and resources to keep your business running smooth.
Thanks for posting! There’s a lot of things to learn here!
[Reply]
kailangan ko pa bang iparehistro sa BIR ang business kong ako lang ang may ari, una sa lahat hindi naman ako nagiissue ng resibo kasi hindi naman araw-araw ay may customers ako…
[Reply]
Tyrone Reply:
October 26th, 2009 at 1:51 pm
Legally speaking, yes, you still need to register it with BIR although a lot of small sole proprietorship companies don’t.
But I think that your customers or clients have the legal right to ask for a receipt for the product or service that you did for them. When that case happens, you cannot issue one and your business can become a subject for scrutiny.
[Reply]
di ba yan yung mga business na mayroon lamang maliit na kapital. tama ang nabasa ko, sayo lahat ng risk, pero if magtagumpay sayo din LAHAT ng kita…
[Reply]
Most freelance business can be termed sole proprietorship…if I’m correct.
Anyway nice post….got to know something very important.
TC
Thanks
[Reply]
Right now, all of my businesses are LLC. For me, I find that LLC’s are perfect for the protection that I need.
[Reply]
Intersting Tyrone. Did you incorporate this site? What are your thoughts on trademarking your name and tagline etc? Thnx man.
Also, if you’re serious about getting an MBA, and the $1,000 giveaway at Financial Samurai, I’m more than happy to talk to you more.
[Reply]
Tyrone Reply:
October 27th, 2009 at 7:46 am
Yes, I made this site but I hired a web developer before to register the domain and for the hosting.
With regards to the domain name “Millionaire Acts”, it was born out of the Law of Attraction. The famous law in the movie “The Secret” which says that “if you want something, all the universe will conspire in helping you to achieve it.” It has become my trademark since then in the blogosphere.
Basically, I want to become a millionaire someday and that’s why it was called “Millionaire Acts”. With regards to the tag line, it’s basically the goal of this site – to achieve financial freedom.
In Third World Country like here in the Philippines, I think that right education and financial literacy are the keys to lessen if not to eliminate poverty.
[Reply]
I think sometimes a sole proprietorship is a good way to start, especially as it’s much simpler – a limited company has a lot more bureaucracy to deal with. Also to some extent you can get insurance against liabilities. But when you get into bigger contracts, often they will require you to be a limited company.
[Reply]
I am planning to operate a store wherein for a start I will only sell 1particular merchandise (processed meat from Pampanga) then eventually add more food products. Would you consider this as a sole proprietorship? Do I need to secure and register this with BTRCP of the DTI? Must I undergo the usual procedure in securing a business permit?
[Reply]
Tyrone Solee Reply:
July 25th, 2011 at 6:35 pm
Hi Rosanna, yes, you can register for Sole Proprietorship with that kind of business. It’s actually easier for you to register a sole proprietorship as compared, for example, to corporation.
As for your second question, yes, I think you need to register that with the BTRCP of DTI and get the necessary business permit to operate.
[Reply]
Hi Tyrone, thanks for your prompt reply. Another questions that comes to mind, (1) must the store name be readied prior to my visit to DTI for registration?, (2) can i proceed with the processing of all the necessary requirements though actual business operation would probably take place after 6 months, like location, etc.? or, which must come first or would it be simultaneous?
Thanks & Regards,
Rosanna
[Reply]
how do you transfer a sole proprietorship? My father(in his 70s) already wanted me to assume his clinic. we have about 9 employees. a friend advised that a better way to transfer is to close down the current business and register a new business name under my ownership with the DTI. but my father so requested not to change the business name and retain all the employees. how do i go about it.
[Reply]
Tyrone Solee Reply:
October 9th, 2011 at 12:21 am
Hi Jin, I asked a friend of mine taking up Law. He said sole proprietorship has no juridical personality of its own. It means that the assets of the business are the assets of the owner, in this case your dad. He can then transfer that to his heirs by succession, just like a normal inheritance.
[Reply]
ok thanks, my only problem now is the BIR, the employees SSS, etc… is there any strict guidelines in assuming the BIR stuff like the business’ income reflecting unto my ITR/financial statements instead under my father’s. can i just renew the DTI permits directly under my name?
[Reply]