Home » What is a Sole Proprietorship and its Characteristic

What is a Sole Proprietorship and its Characteristic

What is a Sole Proprietorship?

Sole proprietorship is a form of business enterprise which is recognized financed, owned, managed and controlled by an individual entrepreneur who has complete freedom of operation who bears all the risks and entitled to the profits.

Making of Money is not the sole objective of Business

what is a sole proprietorship
what is a sole proprietorship


A business owned by a sole person and operated and for one’s own profit is named as sole proprietorship. the individual proprietorship or sole proprietorship is the first-born form of business organization. It is as old as the civilization itself historically it looks that business started original with this form of organization. it is the simplest and natural type of organization.

Sole proprietorship is also called single proprietorship, or one main business. sole proprietorship is legal a form of business organization in which an individual announces his own capital uses his own skill and intelligence in the management of its matters, accepts all the risks of business and is solely responsible for the results of its operations. he thus keeps all and risks all. the business is completely in the hands of an individual.

Examples of sole Proprietorship:
Most of the bakery, hardware stores. Services stations barbers shop doctor’s clinic, service stations beauty parlous etc are examples of sole proprietorship.
One man business is generally small but It can be large as steel mill or a departmental store depending upon the funds/resources available to the entrepreneur.

sole proprietorship
sole proprietorship Example

You May also like to Read 

Some of the important definition of sole proprietorship are as follows.

  1. Parterson and piowman. “A sole proprietorship is a business unit whose ownership and management are vested in one person. The individual assumes all risks of loss or failure of the enterprise and receives all profits from its successful operation.”
  2. James Stephenson. “a sole trader is a person who carries on business exclusively by and for himself. He is not only the owner of the capital of the undertaking but is usually the organizer and manager and takes all the profits or responsibilities for losses”

Sole Proprietorship Characteristics

The main characteristics of sole proprietorship are as under.

  1. The business is owned by a single individual.
  2. The necessary capital to run the business if provided by the sole owner however. He may take loan from other sources such as friends or bank as need arises.
  3. The proprietor himself bears all the risks nobody else has any stake in the business.
  4. Management and control. Being small in size it is managed by the own himself however he may have some paid workers to support him. in any case the decisive control rests in his hands.
  5. Unlimited liability. The sole trader is personally liable for obligations of the business. The creditor can claim not only on his business assets but also his personal properly such as car, house furniture etc to recover the loan.
  6. Customer’s relationship. the sole trader tries to keep good relationship with his customers. the customer is generally personally known to the owner and their orders are higher valued.
  7. legal status. In law, the sole trader and his business are considered as one. In other words, all the assets and liabilities of the business are the private assets and liabilities of the proprietor. we can say that the owner and the business exist together, the two are considered as one in the eyes of law.
  8. No legal formalities. the sole trader can set up or close the lawful business as and when he likes. the operation of his business is not ruled by any special act or ordinance.
  9. easy dissolution. the sole trading business is as easy to end or liquefy as is its formation. the alone decision of the proprietor ends the business.

About the author

Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.

Add Comment

Click here to post a comment