What is Sole Proprietorship?

What is Sole Proprietorship?

Sole Proprietorship is the simplest type of business, in which one person owns and controls the business. He is entitled to bear the full risk as well as enjoy the profit of the business. In simple words, Sole Proprietorship is "One-Man-Business."

What are the examples of Sole Proprietorship?

The examples of Sole Proprietorship businesses include:

• Bakery Shop
• Tailor
• Hair Salon
• Retailers
• Carpenters and More

What are the Characteristics of Sole Proprietorship?

The Characteristics of Sole Proprietorship Includes:

• Easy Formation: Sole Proprietorship is very easy to form because it doesn't require any legal registration.

• Small Capital: The business can be started and run even with a small amount of capital.

• Profit: The sole owner gets the total benefit or profit of the business.

• Management: The whole management of the business is handled by the sole owner.

For What Type of Person Sole Proprietorship is suitable?

This type of business is suitable for a person who:

• Wants to work independently.
• Wants to start business with a small investment.
• Can make all his decisions on his own.

What are advantages and disadvantages of Sole Proprietorship?

Advantages:

➤ Quick Decisions: A sole trader can make quick decisions according to the circumstances. In this way, he saves precious time as no office formality and consultation from other individuals is required. 

➤ Confidential: In such business, as the sole owner manages the whole business and makes all the decisions by himself so in this way, he maintains the secrecy of his business.

➤ Save from Taxes: The rate of taxes is very low in sole Proprietorship because taxes are imposed on the level of income of single owner and the level of income remains low due to limited business activities. So, a sole trader is saved from the difficulty of paying taxes.

➤ Transferable: Sole Proprietorship can be transferred easily to another person because there's no legal formalities or restrictions are required.

➤ Easy Dissolution: This business is easy to dissolve. The sale of business may take some days, but its activities can be closed at any time.

Disadvantages:

➤ Limited Capital: In this type of business, a sole trader has limited capital. He works on a small scale, so he cannot make the use of modern expensive technology and machinery.

➤ Unlimited Liability: A sole trader has unlimited liability. In case of any dispute or failure of business, the personal property of the sole owner can be used to pay the debts and to compensate the burden of loss.

➤ Limited Skills and Ideas: A sole trader has limited sources and due to this he cannot hire the skilled and expert persons, so he has to depend upon his limited skills and ideas.

➤ Difficulty in Expansion: This type of business faces the difficulty of expansion as the sole owner has to depend upon his own limited capital.

➤ Not Durable: Sole Proprietorship is not permanent. Because the death, sickness, accident or the heavy loss of the owner can stop the activities of the business.

Take a moment to consider: Does Sole Proprietorship best suit your goals and Ideas?