Being a sole trader has its own advantages and disadvantages. What must be the most significant advantage is that you will have all the profits you can make out of your business while the biggest disadvantage is you have to do all the work.
Being the sole proprietor of a business means you have to formulate all strategies to make your business grow and succeed. To achieve your goals, you have to set targets and follow procedures which you have established yourself. All decisions are made by no one but you. Indeed, you are the employer and the employee when you are a sole trader.
Multi-tasking in sole proprietorships is the usual set-up. This is because of the low start-up capital in putting-up the business entity. With little resources, the hiring of more employees may be unnecessary. In due time as it is always the goal of all business enterprises to grow and expand, you can have more workers to help you with all your undertakings in coming up with a sustainable and profitable business.
While the hiring of more regular employees may not be a wise decision for a sole trader, hiring workers to do specialized jobs on a contractual basis make more sense. This is why your sole trader accounts should be handled by the most knowledgeable accountant out there.
Experience Makes Perfect
Accounting is a technical job. Accountants are trained to make financial statements. While you may have some knowledge on preparing your financial statements to be used in taxation and insurance, you may not be as competent as professional accountants.
Hiring an accountant to do all financial requirements for taxation and insurance purposes will eliminate errors in your declarations. Submitting erroneous financial statements may subject you to scrutiny by tax officials or worse you can be suspected of tax fraud.
Lessened Work Load
Preparing financial statements can be a stressful work to do for someone who is not used to doing it which can be made more complicated when declaring tax returns and other financial reports.
Being in a sole proprietorship is undoubtedly a taxing endeavor. From managerial functions to delivery works, you sure will be burned out at the end of the day. By hiring a professional accountant, you can spare yourself from the rigorous job of going back to your financial data and preparing pertinent requirements.
External Opinion and Audit
External audit is important in all organizations, business or non-profit. In sole proprietorships, external audit is almost absent.
Being a sole trader means you may not be getting outside opinion or other people’s ideas about the current state of your business because it is you and you alone who knows all about your business operations. This makes sole traders more susceptible to mismanagement from wrong decisions.
Hiring an independent accountant can solve this problem of sole traders. By asking why’s and many other why’s will give you a fair grasp of the financial condition of your business entity. An accountant, after all, also studied subjects in business management and may be able to share to you his observations about your business which can be derived from your financial statements.