IntroductIon to Sole ProPrIetorShIP:
The word ‘Sole’ which means single and the word ‘Proprietorship’
which means ownership. The legal business activities which is owned
and control by an individual is called sole proprietorship.
“The sole proprietorship is the form of business ownership which is
owned and controlled by a single individual.” - B.O. Wheeler
Sole Proprietorship is the oldest and most commonly used form of
business organisation. It is as old as civilization. Historically, it
appears that business first stared with this form of organisation.
In sole proprietorship organisation, an individual is at the helm of
affairs. He makes all the investments, shares all risks, takes all profits,
manages and controls the business himself.
A sole proprietor mainly depends up to his own resources, so the
business is generally on a small-scale basis. The business is normally
run with the help of family members but he may employee person to
look after the day-to-day activities of the business. So far as his
liability is concerned, it is unlimited. The creditors are untitled to
have claim even on his private property.
, FeatureS oF Sole ProPrIetorShIP:
1. Lack of legal formalities:
A sole proprietorship does not have a separate law to govern
it. And so there are not many special rules and regulations to
follow. Furthermore, it does not require incorporation or
registration of any kind. In fact, in most cases, we need only the
license to carry out the desired business.
2. Liability:
Since there is no separation between the owner and the
business, the personal liability of the owner is also unlimited.
So if the business is unable to meet its own debts or liabilities, it
will fall upon the proprietor to pay them. For instance, he may
have to sell all of his personal assets (like his car, house, other
properties etc) to meet the debts or liabilities of the business.
3. Risk and Profit:
The business owner is the only risk bearer in a sole
proprietorship. Since he is the only one financially invested in
the company. As a result, he must also bear all the risk. In
other words, if the business fails or suffers losses he will be the
one affected. However, he also enjoys all the profits from the
business. He does not have to share his profits with any other
stakeholder since there are none. So he must bear the full risk
in exchange for enjoying full profits.
The word ‘Sole’ which means single and the word ‘Proprietorship’
which means ownership. The legal business activities which is owned
and control by an individual is called sole proprietorship.
“The sole proprietorship is the form of business ownership which is
owned and controlled by a single individual.” - B.O. Wheeler
Sole Proprietorship is the oldest and most commonly used form of
business organisation. It is as old as civilization. Historically, it
appears that business first stared with this form of organisation.
In sole proprietorship organisation, an individual is at the helm of
affairs. He makes all the investments, shares all risks, takes all profits,
manages and controls the business himself.
A sole proprietor mainly depends up to his own resources, so the
business is generally on a small-scale basis. The business is normally
run with the help of family members but he may employee person to
look after the day-to-day activities of the business. So far as his
liability is concerned, it is unlimited. The creditors are untitled to
have claim even on his private property.
, FeatureS oF Sole ProPrIetorShIP:
1. Lack of legal formalities:
A sole proprietorship does not have a separate law to govern
it. And so there are not many special rules and regulations to
follow. Furthermore, it does not require incorporation or
registration of any kind. In fact, in most cases, we need only the
license to carry out the desired business.
2. Liability:
Since there is no separation between the owner and the
business, the personal liability of the owner is also unlimited.
So if the business is unable to meet its own debts or liabilities, it
will fall upon the proprietor to pay them. For instance, he may
have to sell all of his personal assets (like his car, house, other
properties etc) to meet the debts or liabilities of the business.
3. Risk and Profit:
The business owner is the only risk bearer in a sole
proprietorship. Since he is the only one financially invested in
the company. As a result, he must also bear all the risk. In
other words, if the business fails or suffers losses he will be the
one affected. However, he also enjoys all the profits from the
business. He does not have to share his profits with any other
stakeholder since there are none. So he must bear the full risk
in exchange for enjoying full profits.
