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?
Looking for a website?
Give your business the online presence it deserves. Get an incredibly cheap website from Promta.
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.
Sole proprietors cannot have investors. Do you have any thoughts or questions? Comment below.