Sole Proprietorship: Meaning and Features

Sole Proprietorship is a form of business organisation that is owned, financed, managed, and controlled by one single individual, who is called the sole proprietor or sole trader. It is the oldest and the most common form of business, especially for small retail shops, tailoring units, provision stores, and local service businesses.

Key features:

• One-man ownership and control — a single person owns the entire business and takes every decision; there is no sharing of ownership or authority.
• No separate legal entity — the business and the owner are treated as one and the same in the eyes of law; the business has no identity independent of its owner.
• Unlimited liability — if the business cannot pay its debts from business assets, the owner's personal property (house, savings, etc.) can be used to settle business dues.
• Sole risk-bearer and sole beneficiary — the proprietor bears every loss alone but also keeps the entire profit; nothing is shared with anyone.
• Capital contribution by the owner — capital usually comes from the proprietor's own savings, and if required, from borrowings in his or her personal name. …