At present sole proprietorship can be
identified as one of the most common
business types that many entrepreneurs
start. These are also known as single owner
businesses. Since entrepreneurs can easily
start these businesses with a small amount
of capital, they can be seen in almost all the
countries in the world.
A business started, owned and run solely by the owner is known as a sole
proprietorship.
Main characteristics of sole proprietorship
1. Capital is provided by the owner
An initial capital is required to get the different resources that are required to start
the business. Investing the capital solely by the owner is a characteristic of sole
proprietorships. Capital can be found through different ways including owners’
savings, funds given by relatives or friends, a loan obtained by selling or mortgaging
his/ her assets or a loan taken from a financial institution.
2. Ownership rests with a single person
Since capital required for the business is invested by a single person, the ownership
too is with that person.
3. Profits or losses are borne alone
The profit earned by the business belongs to the owner. Similarly, if the business
incurs losses, that should be borne by the owner alone.
4. No continued existence
The continuity of the business can stop due to such reasons as death of the
entrepreneur, insanity or any other passivity.
5. Unlimited liability of the owner
Liability means the obligations to repay the loans and other advances obtained from
external parties. In sole proprietorships, liability of the owner is unlimited. this
means that even the private properties of the entrepreneur may have to be sacrificed
to settle the liabilities of the business.
6. Registration is not mandatory
It is not mandatory to register a sole proprietorship. Yet registration of the business
is very useful. If it is registered, it will be registration of the business name. Here
the name of the business will be registered. The business name will be registered
under the Business Name Registration Ordinance.
7. No legal personality
This means that a sole proprietorship cannot conduct any legal operations by its
own business name. If required to do so, it should be done by the personal name of
the owner.
8. Business can solely be led at owner’s discretion
Advantages of sole proprietorships
Can be started with a small amount of capital
Can get the assistance of the members of the family
Convenience of starting
Can make independent decisions
Ability to improve the business with the dedication and the enthusiasm of
the entrepreneur
All the profits belong to the owner
Privacy of the business information is secured
Impact of rules and regulations is minimal
Limitations of sole proprietorships
Sources to get the required capital are limited
No separate legal identity
Unlimited liability of the owner
No continuous existence
Losses should be solely borne by the owner
Individual decisions of the owner may be unsuccessful
