Sole Proprietorship And Its Characteristics

Wednesday 17th of March 2010 | By: Administrator | Views: 34420 | Comments: 0 | Rating: 3 Star Content3 Star Content3 Star Content3 Star Content3 Star Content |  


The individual proprietorship or sore proprietorship is the oldest form of business organization. It is as old as the civilization itself. Historically, it appears that business started first with this form of organization. It is the simplest and natural type of organization.

Sole proprietorship is also called individual proprietorship, or one man business. Sole proprietorship is a form of business organization in which an individual introduces his own capita), uses his own skill and intelligence in the management of its affairs, assumes all the risks of business and is solely responsible for the results of its operations. He, thus, owns all and risks all. The business is exclusively in the hands of an individual. Most of the bakery, hardware stores, service stations, barbers shop, doctor’s clinic, service stations, beauty parlours, etc. are examples of sole proprietorship.

One man business is usually small but it can be a large as a steel mill or a departmental store depending upon the resources available to the entrepreneur. Definitions of Sole Proprietorship

Definitions of Sole Proprietorship
Some of the important definitions of sole proprietorship are as follows:

(1) Paterson and Plowman
A sole proprietorship is a business unit whose ownership and management ace vested in one person. The individual assumes all risk of loss or failure of the enterprise and receives all profits from its successful operation.

(2) James Stephenson
A sole trader is a person who carries on business exclusively by and for himself. He is not only the owner of the capital of the undertaking but is usually the organizer and manager and takes all the profits or responsibilities for losses.

Characteristics of sole proprietorship
The main characteristics of sole proprietorship are as under-

(1) Ownership
The business is owned by a single individual.

(2) Management and control
Being small in size, it is managed by the owner himself. However, he may have some paid workers to assist him. In any Case, the ultimate control rests in his hands.

(3) Finance
The necessary capital to run the business is provided by the sole owner. However, he may borrow from other sources such as friends or bank as need arises.

(4) Risk
The proprietor himself bears all the risks. No body else has any stake in the business.

(5) Unlimited liability
The sole trader is personally liable for debts of the business. The creditor can lay claim not only on his business assets but also his persona! Property such as car, houses, furniture etc to recover the loan.

(6) Legal status
In law, the sole trader and his business are considered as one, In other words, all the assets and liabilities of the business are the personal assets and liabilities of the proprietor. We can say that the owner and the business exist together. In other words, the two are considered as one in the eyes of Paw.

(7) Relationship with customers
The sole trader tries to keep good relationship with his customers. The customers are generally personally known to the proprietor and their orders are higher valued.

(8) No legal formalities
The sole trader can set up or close the lawful business as and when he likes the operation of his business is not governed by any special act or ordinance.

(9) Ease of dissolution
The sole trading business is as easy to end or dissolve as is its formation. The decision of the proprietor alone ends the business. 

Rate this Page:
  • Currently 0/5 Stars.
  • 1
  • 2
  • 3
  • 4
  • 5
Overall Ratings: 0 Stars - 1 Vote(s)
  • Add New Comment


      Please enter your name

      Please enter your email address

      Please enter your web address (Optional)

      Please enter your highly valued comments
    Enter Code
      Human verification code (Required)
  • Your Name

     (28th of November 2014)

    No comments have been posted on this page yet..... Be the first one to share your opinion!