Features of Sole Proprietorship

The essential features (characteristics) of a sole proprietorship follow directly from the fact that a single person owns and runs the business:

1. One-man ownership and control — the business is owned by a single individual, who alone controls its entire working. There are no partners, co-owners or shareholders to consult; the proprietor is the sole authority over every decision.
2. Single supplier of capital — the whole of the capital needed to start and run the business is arranged by the proprietor, from his own savings or from money he borrows on his own personal credit.
3. Unlimited liability — this is the most significant feature. Since the owner and the business are legally one, the proprietor is personally liable for all the debts of the business without any limit. If the business assets fall short of paying its debts, the proprietor's private property (house, personal savings, and other personal assets) can be used to settle them.
4. No separate legal entity — the business has no legal existence distinct from its owner. The law does not recognise the business as a separate 'person'; the proprietor is the business, so the two cannot be separated.
5. Sole enjoyment of profit and sole bearing of loss — the entire profit of the business belongs solely to the proprietor, and, in the same way, the whole of any loss must be borne by him alone. There is no one with whom to share either the reward or the risk.
6. Minimal legal formalities — a sole proprietorship is generally not required to be registered under any specific law to come into existence, and it does not have to publish its accounts. Legal formalities are therefore minimal compared with a company. …