There are different types of business forms used in the world such as sole proprietorship, partnership, company, etc. Every business form has its own advantages and disadvantages.
Sole proprietorship is the oldest and most commonly used form of business in the world. There is no clear explanation by which it can be completely defined. Generally, Sole Proprietorship is a sole proprietorship business and there is no need to register anywhere unless the governing authority issues any guidelines.
Note: Sole proprietor, sole proprietorship, sole proprietor business, sole proprietorship business are the same.
Table of Contents
What is Sole Proprietorship?
Meaning of Sole Proprietorship
Sole proprietorship is a concept in business, and it is a form of business. Sole proprietorship business is run by a single person and that person enjoys the profits and bears all the losses of the business and that person is called the owner or proprietor. In sole proprietorship business, one person means using whose name the business is being run.
In simple language, a business that has only one owner or proprietor (other than a one-person company) is called a sole proprietorship business. Businesses that have more than one owner are either partnerships or higher business forms.
Definition of Sole Proprietorship
According to Davidson – “The sole proprietor carries on business for his own profit bearing all the risks”.
According to own word – “Sole Proprietor is made up of two words “sole” and “proprietor” Sole means “one” and proprietor means “person”. When one person (other than a one-person company) starts a business, it is called a sole proprietorship business.”
Features of Sole Proprietorship
Following are the features of Sole Proprietorship:
1. One Person:
A sole proprietorship business is run by only one person and that person is called the owner or proprietor. In sole proprietorship business, one person means using whose name the business is being run.
2. Easy to Start:
Sole proprietorship business is the easiest business to start and run compared to other types of businesses. Anyone can start and run it. If license or certificate is required then it becomes necessary for the owner to have Aadhar card, PAN card etc.
3. Unlimited Liability:
In a sole proprietorship business, the liability of the owner is unlimited because in a sole proprietorship business the owner and the business are one and the same. If the business assets are not sufficient to repay the debt, the owner’s personal assets are used to repay the debt.
4. Full Control:
In a sole proprietorship business, the owner of the business has full control over the business due to one person. In the eyes of the law, all business decisions and decisions related to the business are taken by the business owner, even those taken by others.
5. Easy to Close:
It is easy to close a sole proprietorship business as there are no formalities or any governing laws, just settle the account and close the business.
6. No Formality:
Any person can enjoy sole proprietorship business as there are no formalities unless the governing authority passes any rules and regulations.
Read Also:
- Advantages and Disadvantages of Sole Proprietorship
- What is Partnership Firm? Meaning, features, and more.
- What is the company? Meaning, features and more.
- What is a One Person Company? Meaning, features, and more.
- What is a Private Limited Company? Meaning, features, and more.
- What is a Public Limited Company? Meaning, features and more.
QNA/FAQ
Q1. What is Sole Proprietorship?
Ans: Sole proprietorship is a concept in business, and it is a form of business. Sole proprietorship business is run by a single person and that person enjoys the profits and bears all the losses of the business and that person is called the owner or proprietor. In sole proprietorship business, one person means using whose name the business is being run.
In simple language, a business that has only one owner or proprietor (other than a one-person company) is called a sole proprietorship business. Businesses that have more than one owner are either partnerships or higher business forms.
Q2. Write the definition of sole proprietor.
Ans: The following is the definition of sole proprietor:
According to Davidson – “The sole proprietor carries on business for his own profit bearing all the risks”.
According to own word – “Sole Proprietor is made up of two words “sole” and “proprietor” Sole means “one” and proprietor means “person”. When one person (other than a one-person company) starts a business, it is called a sole proprietorship business.”
Q3. Write the features of sole proprietorship.
Ans: Following are the features of Sole Proprietorship:
1. One Person
2. Easy to Start
3. Unlimited Liability
4. Full Control
5. Easy to Close
6. No Formality
Q4. Is the liability of a sole proprietor unlimited?
Ans: Yes, the liability of the owner is unlimited because in a sole proprietorship business, the owner and the business are one and the same. If the business assets are not sufficient to repay the debt, the owner’s personal assets are used to repay the debt.
