Explaining, What are the Features of Sole Proprietorship?


Sole proprietorship refers to a business organization in which enterprises are controlled or owned by a single person. The sole proprietorship is the oldest form of business enterprise in India. It is the simplest form of business and all the risk or losses are bearer by the single person. Also, if he wants any help they can get it from their friends, family or relatives. It doesn’t require any legal recognition or formalities and simplest way to open a business. Also learn, Sole Proprietorship: the Advantages and Disadvantages! What are the Features of Sole Proprietorship?

Also, A sole proprietorship is a business owned by a single individual. This sole owner is responsible for the entire business and is the sole recipient of the business’s earnings. Unlike other legal structures, the sole proprietorship requires less paperwork and is subject to few business restrictions and regulations.

The Features of Sole Proprietorship!

The main features of proprietorship form of business can list as follows:

1. One Man Ownership:

In the proprietorship, only one man is the owner of the enterprise.

2. No Separate Business Entity:

No distinction is made between the business concern and the proprietor. Both are one and the same.

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3. No Separation between Ownership and Management:

In the proprietorship, management rests with the proprietor himself/herself. The proprietor is a manager also.

4. Unlimited Liability:

Unlimited liability means that in case the enterprise incurs losses, the private property of the proprietor can also utilize for meeting the business obligations to outside parties.

5. All Profits or Losses to the Proprietor:

Being the sole owner of the enterprise, the proprietor enjoys all the profits earned and bears the full brunt of all losses incurred by the enterprise.

6. A Less-Formalities:

A proprietorship business can start without completing many legal formalities. There are some businesses that too can start simply after obtaining necessary manufacturing license and permits.

7. Personal Organization or Common Identity:

A sole traders concern has no separate legal entity independent of the owner. The owner and the business concern are one and the same. The owner owns everything the business owns and he owes everything the business owns.

8. Capital:

In the sole traders, the capital is employing by the owner himself from his personal resources. He may also borrow money form his friends and relatives if he cannot depend solely on his personal resources.

9. Profits and Losses:

The surplus arising in the business of the sole trader entirely belongs to him and similarly, all the business losses and risk are to be borne by him alone.

10. No Special Legislation:

Sole traders are not governing by any special legislation. A partnership firm is governing by the Partnership Act, a joint stock company is governing by the Companies Act and co-operative society by the Co-operative Societies Act. Any person who is competent to contract can start his business as a sole trader. However, he is subject to the common law, the law of contract and the law of insolvency.

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The concept of Unlimited Liability. As well as, the liability of a shareholder or member of a company or a co-operative society is limited to the extent of the face value of the shares held by him. For example, if Mr. X subscribes to 100 shares of Rs. 10 each, his total liability is unto Rs. 1,000 only. If he has already paid Rs.5 per share, his liability will restrict to the unpaid portion of his shares, i.e., Rs. 500 only. Thus, there is a limit to the extent of liability of the shareholder of a company.

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Learn and Study, What are Disadvantages of Sole Proprietorship? Explaining are, Easy Point, Trade, Multipoint! A sole proprietorship is the simplest and most common legal structure someone can choose. It’s an unincorporated business owned and run by one individual in which there is no distinction between the business and the owner.