The current spate of lay-offs and the minute likelihood of finding another job is making self-employment more and more a forced option. Even as you consider what service or product you will market and sell, you can also consider how to organise your business.
The first and easier way is to be a sole proprietor – you as manager and chief bottle-washer. You have no partners and you do not wish to incorporate your business. You will be the main person in the business; any other person would just be assisting.
You may care to register a specific business name. This will protect your business from anyone else using the same name/brand. Registration at the Corporate Affairs and Intellectual Property office (CAIPO) is just $100 once the chosen name is approved.
A sole proprietor needs to be quite knowledgeable about the product or service offered or have lots of free advisers. The development and success of your business will depend mainly on your capabilities in managing various functions like marketing the product, maintaining the accounts and information files, responding to any legal issues, controlling the product flow and managing the finances.
It pays to have an accountant and an attorney who are willing to help as needed for free or for in-kind payment. Otherwise, in the beginning, you may have to rely on your intuition and common sense to make your business viable. It is virtually impossible to find the breath of skills in a sole proprietor that can be offered by a team of competent and specialised management professionals. This limitation can be overcome by delegation of management authority and responsibilities as the business grows.
In addition, and quite importantly, for this way of organising your business, you have to be able to count on your good health and stamina. The days of calling in sick and refusing to work overtime or on weekends will likely be gone. When the business is yours, you need to do whatever, whenever and to the extent needed in order to help the business to survive and to grow at little cost.
As the business builds up into a stable income earner for you, there may be no sophisticated fringe benefits such as health insurance schemes, pension plans and group life insurance which your previous employer may have provided. Yet, it may be possible to negotiate comparable benefits through a credit union or another association.
One benefit of operating as a sole proprietor is being able to do as you like, to live your dreams and rest on your own motivation and drive. Some call this the entrepreneur element; however, it only seems to get called that when you are significantly successful.
Sole proprietors often try to share or pass on the ownership and management of the business like a legacy to other family members. Such arrangements can lead to critical problems with the business when the “inheritor” has limited credibility, know-how and understanding of the operations.
One of the greatest drawbacks of the sole proprietorship is the unlimited liability of the owner. Alternate ways of organising the business will be the subject of another article.
Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances.
