There are many forms of business ownership, among these is sole proprietorship. Often chosen by a lot of people who are just starting out their businesses. Registering a company might seem intimidating. Can you have investors as a sole proprietor?
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The short answer is no; a sole proprietor can’t have investors. A sole proprietor owns 100% of the business, giving away some of that ownership means you are no longer a sole proprietor.
Do investors even look your way?
A lot of investors will not want to fund sole proprietors, this is because sole proprietorship is difficult to regulate. Investors want to invest in a company, with a clear company structure; where they will be able to own a certain amount of stock.
Sole proprietors are not authorized to issue any stock, this makes it virtually impossible to be a shareholder in a sole proprietorship.
What should you do to get investors?
If your small business grows to a point where you feel like you need investors then you will have to change your form of ownership. Let go of sole proprietorship in favour of a private company, registering a private company is currently R125 in South Africa.
You can still own 100% of your business while owning a private company, it also makes it easier to value your business, get tenders and attract investors.
Conclusion
Sole proprietors cannot have investors. Do you have any thoughts or questions? Comment below.
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