For many people, running their own business is a dream come true. Not being answerable to anyone and making decisive but impactful decisions all by yourself is something everyone mulls over at some point in their life. Due to this, many freelancers ultimately set up a sole proprietorship.
A sole proprietorship is essentially an unincorporated company which is owned, operated and controlled by one person, the so called sole proprietor. Being the most simplistic structure to start a business, sole proprietorship has been gaining a lot of traction in the freelance industry.
Approximately 14% of the Singapore workforce is self-employed. 16% of the freelancers fall in the age group of 18–24. To put it into perspective, this a large number of individuals who set up new businesses every year and they are on the lookout for a business structure that will help them to ease into their new undertaking in a hassle free manner.
Now, there are a lot of reasons why freelancers opt to set up a sole proprietorship. Most of them being fresh entrants in the industry, a sole proprietorship makes it extremely convenient for them to set up their business in the easiest way possible and have a smooth transition.
Few of the benefits of setting up a sole proprietorship, making it so attractive to freelancers, are:
1. Ease of incorporation — Sole proprietorship is by far the easiest type of business to set up. The process is quicker than other businesses, it’s easier and involves considerably lesser paperwork. Everything that a freelancer dreams of starting his business with!
2. Legitimacy of operations — Setting up a sole proprietorship would help freelancers establish themselves as a legitimate business entity and protect them against possible compliance or legitimacy lawsuits.
3. Simpler and cheaper tax returns — Of all the business structures, tax returns for a sole proprietorship are the simplest to file. As a result many freelancers prefer to file their own tax returns. The simplicity of sole proprietorship tax returns also means that there’s no need to regularly hire auditors to assess your financial activity. This alone could save the freelancer thousands of dollars every year!
A freelancer can always opt not to set up a sole proprietorship and continue to run the business without a specific business structure. But having a particular business structure can help freelancers dodge a ton of bullets in the inception phase. In fact, setting up a sole proprietorship, or any other business structure as a matter of fact, can help freelancers tackle the most ubiquitous problem in the gig economy — financing.
Being a business owner creates the perception of more financial credibility than a freelancer without a business structure, from the perspective of a bank or a financial institution. This could help the freelancer earn more reasonable interest rates and up the possibility for loan approval.
A sole proprietorship provides a base to start the business on. Establishing your own business might be your goal, but keep in mind that while many freelancers and entrepreneurs are successful, plenty of them fail too. Finding the perfect balance is crucial.
We at Friz, want to help these freelancers with newfound sole proprietorships with their financial stress, so they can focus on transitioning into a successful piece of the global workforce.
If you are a freelancer who has a story to tell about your experience with banking or just wants to chat — drop us an email on email@example.com.