Sole Proprietorship Form

Sole Proprietorship Form

The sole trader organization (also called proprietorship) is the oldest form of organization and the most common form of organization for small businesses even today.  In a proprietorship the enterprise is owned and controlled only by one person.  This form is one of the most popular forms because of the advantages it offers. It is the simplest and easiest to form.

 

Definition of Sole Proprietorship

The sole trader organization (also called proprietorship) is the oldest form of organization and the most common form of organization for small businesses even today.  In a proprietorship the enterprise is owned and controlled only by one person.  This form is one of the most popular forms because of the advantages it offers. It is the simplest and easiest to form.

The sole trader enjoys full control over the affairs of the firm and responsible for both the profits earned by the business and the loss. Sole Proprietorship is one man's business in which an individual produces independently with his own capital, skill and intelligence and is entitled to receive all the profits and assumes all the risks of ownership.  Under this form of business organization, no distinction is made between the business concern and the proprietor.

Main Features

  • One man ownership
  • No separation of ownership and management
  • High degree of supervision and control in the working of his business
  • No separate entity from the owner
  • All profits belong to proprietor
  • Individual risk as all losses in the business are borne by the proprietor himself
  • The proprietor has an unlimited liability - personal property of the owner can be attached for business debts
  • Ease of formation - less legal formalities
  • Not suitable for large scale operations as the resources of the sole trader are limited

 

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