Sole Proprietorships – Is it really a good idea?


Starting your business means you need to have a base of where you can operate your organization. Registering a business is exceptionally important. If you started with a small business idea, the most common way to do this is to register for a sole proprietorship company which in Malaysia would usually called an ‘enterprise’.

What is it actually?

This is the simplest form of a business structure. What you aim to do when you register a sole proprietorship is to start something quickly and easily so that you can get your business up and running as soon as possible. You do not want to have too much compliance issues and it can be completed within a few hours.
Basically, when you own a sole proprietorship, it means:

  1. You are the owner and operator of the business
  2. you report the business income based on your individual financial standings
  3. you are entirely responsible for anything that goes on in the business

Why you should have a sole proprietorship?

You might have by now know that there are more advantages to have a Sdn Bhd instead of a sole proprietorship. But it is not as bad as you think. In fact, there are a lot of misconceptions to having a small business including this one.
Among the reasons you want to register a sole proprietorship are:

  1. East to start – One thing for sure, starting a sole proprietorship company is a lot less complicated. This is if compared to a formal corporation like a Sdn Bhd.
  2. Cost – It is definitely cheaper than any other form of business.
  3. Naming – With a sole proprietorship business, you are free to name it anyhow you like it. It can be your own name or a fictitious name as long as it helps your business.
  4. Hiring of staff – It is easy to hire staff in your business. You have the freedom to create any job title and it can involve any one in your family or friends.
  5. Freedom – Within your company, you have the freedom to make decisions based on your judgment and experience. Naturally, you have full control of what happens in the business and be fully responsible for it as well.

Why you should not have a sole proprietorship?

When there is a upside, there will always be a downside. What then, are some factors that might deter you from forming a sole proprietorship?

  1. Risk – This is the one factor that will be most influential. You will be sole responsible for all the risk that the business undertakes. This includes all the debts or losses should there be any. Risk here not only involves monetary issues but others as well.
  2. Legal issues – If any of your employees break the law, you will be responsible to accept the consequences. Take note that you might be held liable as the company is registered under your name
  3. Personal wealth – one of the biggest pitfalls of having a sole proprietorship is that it affects your personal wealth. It does not matter where your capital comes from, but if there is a loss, you will have to fork it out of your own personal wealth. In the event that your business is unable to fulfil a debt, you will have to personally need to pay for it. Failure to do so means you might be sued and run into the risk of bankruptcy.

So there you have it, both sides of whether you should register for a sole proprietorship business in Malaysia. it is good if you are looking for convenience and if your business is not a large one. In fact, small business ideas like secretarial services would be great for this type of registration. However, you need to consider converting it to a Sdn Bhd if your business grows and you begin to take expand before the risk becomes too high.

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