Top 10 Features of Sole Proprietorship form of business

Sole proprietorship is the oldest form of business organisation in which a single individual introduces his or her own capital, skills, an intelligence in the management of its affairs. And it’s and is solely responsible for the results of its operations.

 Definitions:

 According to 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 organiser and manager and takes all the profits or responsibility for losses.

 According to J.L. Hanson, “A type of business unit where one person is solely responsible for providing the capital and bearing the risk of the enterprise, and for the management of the business.

 Features of sole proprietorship. 

The following are the important features of sole proprietorship business organisation.

 

1.     Individual initiative: The sole proprietorship business is started by the initiative of a single person who wishes to start the business. He prepares the business plan and arranges various factors of production. The profits or losses of the business are taken by the individual.

2.      Single ownership:  The sole proprietorship form of business organisation has a single owner, who himself/ herself start the business by bringing together all the resources.

3.      Less legal formalities: The formation, an operation of a sole proprietor involves less legal formalities. Thus, it’s formation and winding up is quite easy and simple.

4.      Unlimited liability: The important feature of the Sole Proprietor ship is that the liability of sole procreator is unlimited. In case of loss, If his/her business assets are not enough to pay the business liabilities., his personal property can also be utilised to pay off the liabilities of the business.

5.      Ownership and management exist together: There is no separation of ownership and management in sole proprietorship, as is the case with the company form of business organisation. The business is dissolved. If the owner dies, becomes insolvent or is removed from the business.

6.      Motivation: The sole proprietor enjoys all the profits and at the same time bear the losses, if any? No other person shares the profits and losses of the business. This motivates him or her to expand the business activities.

7.      Secrecy: All the important decisions are taken by the sole proprietor himself or herself. He or she keeps all the business secrets only with himself or herself. Business secrets are important for small business to grow and avoid the competitors to enter into the same market.

8.      No separate entity: The sole proprietorship business is not separate from the owner. The sole proprietor and the business enterprise are one and the same. He/she will be responsible for everything that happens in the business unit.

9.      One man control: The management and controlling power of the sole Proprietorship business always remains with the owner. He or she prepares various plans and executes them under his or her own supervision. He or she runs the business as per his or her own will.

10.   Limited area of operations: As the sole proprietor has limited resources and managerial abilities, sole Proprietorship business has limited areas of operations. He or she can provide limited funds only and can supervise a small business.