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Pros and Cons of a Service Business
Let’s consider the positive and negative aspects associated with the functioning of an enterprise in the service sector.
Pros:
- relatively low entry timely notify the bank of financial difficulties threshold: almost anyone who has some useful and in-demand professional skills can open a small business;
- no need to invest significant amounts at the start;
- simple preparation for opening a business;
- the ability to make a profit almost immediately or fairly quickly;
- the possibility of promotion solely through word of mouth without large investments in advertising;
- simple accounting statements.
Cons:
- lack of information bulk lead about the situation on the services market in the region may lead to bankruptcy;
- high level of competition;
- The wrong choice of employees can cost the company lost money and image.
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Ownership form and taxation type for business in the service sector
To operate legally, you must register your company as an LLC or yourself as an individual entrepreneur. The table shows the pros and cons of each form of ownership.
| Form of ownership | Advantages | Flaws | Recommendations |
| Individual entrepreneur | Easy reporting. Inexpensive registration. Possibility of hiring people. Low tax rates. Patent availability. Fines for financial violations are lower than in other options. | There are restrictions on the choice of the field of activity. Great difficulties in interaction with large clients. Significant entrepreneurial risks | It makes sense to register as an individual entrepreneur at the very beginning of your entrepreneurial journey, when there is no large turnover. |
| Limited Liability Company | Possibility to include up to 50 founders in the composition of participants. Minimum initial capital – 10 thousand rubles. Wider choice of sphere of activity. High status of a legal entity | Higher state duty. Significant fines for financial violations. Income is dividends. Tax rate is 13%. Need for the services of a competent accountant | This form should be chosen by companies that expect high turnover and plan to control a large share of the market. |
Of course, there are other organizational and legal forms of business registration, but it is practically impossible for companies doing business in the service sector to use them. Only LLC and individual entrepreneur remain.