By Amin Kef Sesay
In Sierra Leone and in all developing economies, the stepping stone to bigger things is sole proprietorship. The big firms that we see today, Chanrai, Choithram etc, had their origins from humble beginnings as one man businesses. Importantly, President Bio’s Government places at lot of emphasis on the empowerment of SMEs that in fact his Government has provided seed money of about Le20 billion to inject life into them; with more promised to come as time goes by.
The main advantage of sole proprietorship is that it is one of the easiest types of businesses to start. Unlike corporations, all you need to do is to acquire appropriate permits and licenses to operate legally from the Office of the Administrator General at Roxy Building on Walpole Street, whilst you are personally liable for debts, lawsuits, or taxes your company accrues.
Many entrepreneurs love sole proprietorships because of the ownership they have over business decisions and revenue and how easy and cost-effective they are to set up.
So when you look at the composition of the Sierra Leone business landscape, not less than 80 percent are one man businesses but which play a very big role in job creation and earning of incomes, even if they pay little or no income tax to Government but they pay other business taxes demanded for by Councils and the Government.
However, sole proprietorships are strapped with big risks. Increased personal liability, difficulty raising capital and a perceived lack of professionalism are a few of the pitfalls sole proprietors must navigate.
Across the broad spectrum of the economy, a variety of businesses are operated as sole proprietorships. Because they’re free and easy to start, many people use sole proprietorships to turn their side hustles into something a little more serious and lucrative. Here are some examples of common sole proprietorships:
Teacher, Daycare operator, Nurse, Doctor, Pharmacist, Physiotherapist, Gym Operator, Fitness instructor…
Freelance graphic designer, Freelance writer, Housekeeper, Landscaper, Gardener, Caterer, Direct Salesperson, Accountant/Tax Preparer, Computer/IT Specialist, Financial Planner, Home Healthcare Worker, Virtual Assistant, Nanny, Event Planner, Tutor, Consultant and a host of others
Sole Proprietorship Disadvantages
Do not for one moment think that because of the freedom he/she has to run his/her business is absolute and they do not have troublesome sleepless nights.
- Their personal assets are at risk
- Increased personal liability for lawsuits
- Business bankruptcy means personal bankruptcy
- Difficulty raising capital
- Self-employment tax
- Banks do not lend them money because they are high risk customers
Because one of the biggest risks to starting a sole proprietorship is the liability it burdens the owner with, having adequate insurance is a must.
Consider property and liability coverage, auto insurance, health coverage, and disability coverage, at the very least. This can get expensive, but it ensures you and your personal assets are protected from lawsuits and professional setbacks, should they arise.
