Sole proprietorship represents the first stage in the evolution of forms of business ownership. It has been in existence since the birth of business.
After the Industrial Resolution partnership and joint stock company became popular. But sole proprietorship continues to survive and grow along with large scale enterprise. It will continue to survive due to the following reasons:
1. Nature of market:
Consumers are widely scattered. Large firms cannot carry on their operations at all places. Some traders are widely scattered like consumers. They are needed to satisfy local needs at all places.
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2. Small capital:
A sole trader needs very small amount of capital. Therefore, it is very easy to start. Even a poor person can become a sole trader
3. Direct services:
Direct services such as those of lawyers, doctors, accountants, tailors, hair dressers, beauticians, etc can better be conducted independently. Some traders can easily cater to the changing tastes and fashions of consumers.
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4. Speculative business:
Stock brokers, commission’s agents and other specialised activities require quick decisions and intuitive judgments. Therefore, these can better be carried on as sole traders.
5. State assistance:
Sole proprietorship provides gainful employment to a large number of people. It also helps in checking monopoly and concentration of economic power. Therefore, Government provides fiscal and other benefits to cottage and small scale units which are generally organised as sole proprietorship firms.