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Sole Proprietor Or Partner - Which is Best for Daycare?
Are you fretting over whether you should start a
daycare centre on your own or with a partner? To make an informed decision, you first need to understand how both business
ownerships differ. Whilst both are fairly simple forms of ownership and ideal for small businesses, it has its advantages
and disadvantages. Sole
Proprietorship
Let’s start with sole proprietorship. It is a very simple model. You just walk
into the company registration authority to register your daycare business. The owner and the company are not separate legal
entities, which means that you and the day care business are considered as one entity for tax and liability purposes. The
daycare business and you are jointly responsible for all debts related to the day care business. Partnerships
As for partnerships, there
are 2 different types. One is general partnership whilst the other is private limited. Like sole proprietorship, a general
partnership is also very easy to set up, simply walk into the company registration authority to register your day care business.
And like in a sole proprietorship, the daycare business and its partners are not separate legal entities. Which means all
the partners are responsible for any debts incurred by the day care business. For example, if the daycare business incurred
a debt of $30,000 and the partners decided to wind up it up due to lack of capital, all the partners are liable to pay off
the debt with their own personal assets, unless they choose to declare bankrupt. Unlike in a private limited partnership,
the partners and daycare business are considered separate legal entities and are therefore not liable to pay off any debts
with their own personal assets. However, unlike a general partnership, it is a little more complicated to set up and will
entail depositing and maintaining a certain amount of money in the bank which acts as a guarantee. The plus side is suppliers,
because of the forced deposit in the bank, tend to be more inclined to offer private limited companies better credit terms
than a general partnership. Differences between sole proprietorship and partnership
When you start a daycare
as a sole proprietor, you are the boss and therefore have the absolute say in the daycare business. It also means that you
will need to undertake all the risks, costs and responsibilities by yourself. However, when you start a daycare partnership, all
the risk, cost and responsibilities are shared as all the partners are bosses. Which also means that the running of the daycare
business will need to be by general consensus to ensure that all the partners are kept happy. Conclusion
There is no one best business
ownership model for a day care as both of them carries with them its own form of risk and returns. Some prefer the freedom
of a sole proprietorship whilst others feel more secure in numbers. Even in partnerships, some prefer the simplicity of a
general partnership whilst others prefer the security of a private limited partnership. Which form of business ownership you
ultimately enter into for your daycare business is highly dependent on your personal risk appetite and resource.
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