Meaning and Definition of Sole Proprietorship

A sole proprietorship is the oldest, simplest and most common form of business organisation. As the name itself suggests — sole meaning single and proprietor meaning owner — it is a business owned, financed, managed and controlled by one single individual. That one person supplies the entire capital, takes all the business decisions, enjoys all the profits and, equally, bears all the losses and risks alone. The sole proprietor and the business are, in the eyes of the law, one and the same person; the business has no identity of its own apart from the owner.

A widely accepted definition is that of J. L. Hanson, who described sole proprietorship as "a type of business unit where one person is solely responsible for providing the capital, for bearing the risk of the enterprise, and for the management of the business." Every neighbourhood grocery store, tailoring shop, small tea stall, chemist's shop or freelance professional practice run by a single owner is, in most cases, a sole proprietorship.

This is the same core form — the single-owner business with unlimited liability and complete control — that Commerce and Business Studies students following other State and Central boards (including the CBSE/NCERT Business Studies course) study as well. The underlying commercial principles of sole proprietorship are common across India and are not something peculiar to Tamil Nadu's own syllabus; what differs from board to board is only the depth of treatment and the order of presentation, not the substance of the concept.