Sole Proprietorship: The Best Option for Beginners
25 May 2011
Read by 1736 persons
It's a simple and inexpensive option for those who want to start their own business. The only risk is the confusion between personal assets and business assets. Some associations and experts advocate for a much more flexible self-employment status.
Being your own boss. Who hasn't thought about it one day? For those taking the plunge and wanting to realize their dreams, it's an uphill battle. In this long journey, there's one important point not to overlook: the legal status of the business. This is important because it directly impacts how the business is managed, taxation, and the level of responsibility... For first-timers, the simplest option is to start with a sole proprietorship, even if personal assets may be at risk in case of difficulties. 39% of businesses created in 2010 were set up under this legal form.
Why this choice? Firstly, because the procedure is much simpler than for other types of companies. Often attributed to craftsmen and traders, sole proprietorships allow access to very simplified tax and social security options (micro-business scheme) that companies cannot benefit from.
No legal or regulatory provision requires a self-employed trader to constitute capital for the operation of their sole proprietorship, unlike companies. Therefore, there is no concept of share capital and no contribution is required. Furthermore, you are not required to set a duration for the operation of your business. Thus, the operation can last beyond 99 years without needing to explicitly decide on any extension.
Accounting is simplified and the owner is not required to file accounts with the Commercial Court registry.
Towards Greater Administrative Flexibility
Legally, a sole proprietorship does not have a legal personality, meaning the sole proprietorship and the entrepreneur constitute one and the same legal entity. "We speak of a confusion of assets: there is no separation between the entrepreneur's personal assets and their professional assets," explains Zakaria Fahim, chartered accountant and CEO of the BDO firm. And it is this last point that constitutes one of the main risks for the creator.
Indeed, the entrepreneur is indefinitely and jointly and severally liable for the company's debts with their own assets. If they go bankrupt, their personal assets can therefore be seized. The fear of losing everything can be a discouraging factor, especially when there is virtually no social safety net to mitigate the consequences of a business going wrong. For many experts, this point constitutes a huge obstacle to job creation. Certainly, simplicity is important, but they believe it's possible to do better.
Thus, more and more voices are being raised to promote self-employment status. For example, the Centre des jeunes dirigeants (CJD) sees it as a way to encourage private initiative. "This option is particularly aimed at people who want to be able to easily start or stop their activity, without necessarily creating a commercial company. Students, employees, civil servants, job seekers or retirees can benefit from it. It is intended for a large population that carries out activities complementary to a basic professional activity," highlights Driss Belkhayat, President of the Centre des jeunes dirigeants (CJD Morocco).
According to the model proposed by the CJD, anyone wishing to create their business should be able to do so through a dedicated website, without any registration fees. No more countless administrative problems that generate often considerable costs, while the business hasn't even started yet. Like the current sole proprietorship, no minimum capital should be set and taxation should be simplified. To this end, it has been proposed to set a flat tax of around 3% of turnover.
In case of cessation of activity, "the entrepreneur can dissolve their business very simply," underlines Mr. Fahim.
Obviously, self-employment is only a stage because every business is called to grow. This is at least the wish of every promoter. To benefit from such a status, turnover must not exceed 300,000 DH for services and one million DH in buying/selling, suggests the CJD while other bodies propose 120,000 and 240,000 DH respectively. In any case, the objective is the same: to give the possibility of creating a business without thinking about the psychological barrier. Moreover, this option allows attracting those who carry out activities outside the formal economic circuit.
Obviously, abuses can always exist, such as under-declaration. "No system is foolproof, but we can always encourage entrepreneurs not to cheat by giving them bonuses, for example training or trips (Mecca, summer trips…)", underlines Mr. Fahim.
In France, the self-employed even have the possibility of making a declaration of non-seizability of their main residence before a notary, but also of all the assets making up the real estate assets not used for professional purposes. To avoid bankruptcies that can ruin a whole life, this idea is also put forward here.
Nevertheless, facilities, whatever their nature, do not guarantee success. The young entrepreneur must prepare their project well and, above all, approach people or structures able to provide advice and assistance. Alone, you always risk making fatal mistakes. And above all, do not neglect "training in the field related to your project, including accounting, legal and tax aspects," specifies Mr. Fahim.
Published May 25, 2011
Online May 25, 2011
Lavieeco.com
Being your own boss. Who hasn't thought about it one day? For those taking the plunge and wanting to realize their dreams, it's an uphill battle. In this long journey, there's one important point not to overlook: the legal status of the business. This is important because it directly impacts how the business is managed, taxation, and the level of responsibility... For first-timers, the simplest option is to start with a sole proprietorship, even if personal assets may be at risk in case of difficulties. 39% of businesses created in 2010 were set up under this legal form.
Why this choice? Firstly, because the procedure is much simpler than for other types of companies. Often attributed to craftsmen and traders, sole proprietorships allow access to very simplified tax and social security options (micro-business scheme) that companies cannot benefit from.
No legal or regulatory provision requires a self-employed trader to constitute capital for the operation of their sole proprietorship, unlike companies. Therefore, there is no concept of share capital and no contribution is required. Furthermore, you are not required to set a duration for the operation of your business. Thus, the operation can last beyond 99 years without needing to explicitly decide on any extension.
Accounting is simplified and the owner is not required to file accounts with the Commercial Court registry.
Towards Greater Administrative Flexibility
Legally, a sole proprietorship does not have a legal personality, meaning the sole proprietorship and the entrepreneur constitute one and the same legal entity. "We speak of a confusion of assets: there is no separation between the entrepreneur's personal assets and their professional assets," explains Zakaria Fahim, chartered accountant and CEO of the BDO firm. And it is this last point that constitutes one of the main risks for the creator.
Indeed, the entrepreneur is indefinitely and jointly and severally liable for the company's debts with their own assets. If they go bankrupt, their personal assets can therefore be seized. The fear of losing everything can be a discouraging factor, especially when there is virtually no social safety net to mitigate the consequences of a business going wrong. For many experts, this point constitutes a huge obstacle to job creation. Certainly, simplicity is important, but they believe it's possible to do better.
Thus, more and more voices are being raised to promote self-employment status. For example, the Centre des jeunes dirigeants (CJD) sees it as a way to encourage private initiative. "This option is particularly aimed at people who want to be able to easily start or stop their activity, without necessarily creating a commercial company. Students, employees, civil servants, job seekers or retirees can benefit from it. It is intended for a large population that carries out activities complementary to a basic professional activity," highlights Driss Belkhayat, President of the Centre des jeunes dirigeants (CJD Morocco).
According to the model proposed by the CJD, anyone wishing to create their business should be able to do so through a dedicated website, without any registration fees. No more countless administrative problems that generate often considerable costs, while the business hasn't even started yet. Like the current sole proprietorship, no minimum capital should be set and taxation should be simplified. To this end, it has been proposed to set a flat tax of around 3% of turnover.
In case of cessation of activity, "the entrepreneur can dissolve their business very simply," underlines Mr. Fahim.
Obviously, self-employment is only a stage because every business is called to grow. This is at least the wish of every promoter. To benefit from such a status, turnover must not exceed 300,000 DH for services and one million DH in buying/selling, suggests the CJD while other bodies propose 120,000 and 240,000 DH respectively. In any case, the objective is the same: to give the possibility of creating a business without thinking about the psychological barrier. Moreover, this option allows attracting those who carry out activities outside the formal economic circuit.
Obviously, abuses can always exist, such as under-declaration. "No system is foolproof, but we can always encourage entrepreneurs not to cheat by giving them bonuses, for example training or trips (Mecca, summer trips…)", underlines Mr. Fahim.
In France, the self-employed even have the possibility of making a declaration of non-seizability of their main residence before a notary, but also of all the assets making up the real estate assets not used for professional purposes. To avoid bankruptcies that can ruin a whole life, this idea is also put forward here.
Nevertheless, facilities, whatever their nature, do not guarantee success. The young entrepreneur must prepare their project well and, above all, approach people or structures able to provide advice and assistance. Alone, you always risk making fatal mistakes. And above all, do not neglect "training in the field related to your project, including accounting, legal and tax aspects," specifies Mr. Fahim.
Published May 25, 2011
Online May 25, 2011
Lavieeco.com
