Sole proprietorship

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


Post a Comment

* Please Don't Spam Here. All the Comments are Reviewed by Admin.

buttons=(Accept !) days=(20)

Our website uses cookies to enhance your experience. Learn More
Accept !