The economic activity of a Country is greatly determined by the combined effort of various economic agents who provide goods and services. Although the needs of a modern economy are greater than the means that a private individual businessman has in possession, private individual businesses, nevertheless, stand as the driving force of the economic operators.
Before investing as a natural person, every prospective entrepreneur has to consider the following questions before delving into business as a sole proprietor:
What is a sole proprietor?
What are the characteristics of a sole proprietorship?
What are the conditions to fulfil in a bid to float such a business and how does it function?
What are the hypotheses under which sole proprietors are subjected?
Can sole proprietors or private individual businessmen be joined in business by others within the same scope of business?
A sole proprietorship has no formal definition. However, it can be understood as all forms of business venture initiated and controlled by a natural person in his personal name withoucreating authenticityte entity. Also, it may be defined as every commercial activity run by a natural which has no distinct corporate personality, though duly registered in the Trade and Personal Property Credit Registry (R.C.C.M).
The different and principal forms of sole proprietorship are generally carried as traders, craftsmanship, liberal professionals and farmers.
After ascertaining the type of business to invest in as a natural person, the Cameroonian or foreign entrepreneurfulfillfil the following conditions, to wit:
To Register the business in the Trade and Personal Property Credit Register at the Court of First Instance of the area where the headquarters or head office of the venture is situated;
Establish a Tax payer’s card at the Tax office of the area where the business is situated;
Obtain a letter of non-indebtedness from the said Tax office;
Obtain an attestation of location from the said Tax office;
If the natural person is a foreigner, he must obtain a special business card issued by the Chamber of Commerce of the area where the business is situated;
Obtain a business license issued by the Tax Office area where the business is situated.
A sole proprietorship has its characteristics distinct from companies. Legally speaking, there exists no distinction between the proprietor/entrepreneur and his venture. Dispossessed of any corporate personality, the only patrimony left and identifiable is that of the owner of the business, in this case, the sole proprietor. The proprietor’s liability is unlimited to his business and any debts incurred by the business shall be expunged in consideration of his private property and even property acquired in marriage, if he is married under the regime of joint property.
The doing of business under sole proprietorship has its advantages as well as disadvantages:
ADVANTAGES:
- Liberty and flexibility to venture into new activities;
- Simplicity in its creation and management;
- The proprietor is faced with fewer procedures to run the business;
- Lighter tax regime.
DISADVANTAGES
- The unlimited nature of liability between the business and the proprietor;
- limited growth at the business on the financial aspect, since the credibility of the company is directly linked to that of the proprietor;
- Difficulty in obtaining finances/loans from big institutions.
In summary, the choice of the type of business venture, especially as a sole proprietor depends strongly on the tax scheme and legal compliance vis-à-vis the business. It’s therefore important to gauge the advantages with the inconveniences of the different legal forms under which business can be done with regard to the anticipated activity, the personal situation of the proprietor as well as potential financial partners.
Reine B. TSAFACK DONGMO
Sollicitor
MOJUFISC