What are the Characteristics of sole proprietorship?


The distinguishing characteristics of sole proprietorship are as follows:

1. Single ownership:

A sole proprietorship is wholly owned by one individual. The indi­vidual supplies the total capital from his own wealth or from borrowed funds.


2. One-man control:

The proprietor alone takes all the decisions pertaining to the business. He is not required to consult anybody. Ownership and management are vested in the same person. Some persons may be employed to help the owner but ultimate control lies with him.

3. No legal entity:

A sole proprietorship has no legal identity separate from that of its owner. The law makes no distinction between the proprietor and his business. The business and the owner exist together. If the owner dies or becomes insolvent the business is dissolved. Business and the proprietor are one and the same.


4. Unlimited liability:

The proprietor is personally liable for all the debts of the business. In case the assets are insufficient to meet its debts, the personal property of the proprietor can be attached.

5. No profit-sharing:

The sole proprietor alone is entitled to all the profits and losses of business. He bears the complete risk and there is nobody to share the profits or losses.


6. Small size:

The scale of operations carried on by a sole proprietorship is generally small. A sole trader can arrange limited funds and managerial ability. Therefore, the area of operations is limited.

7. No legal formalities:

No legal formalities are required to start, manage and dissolve sole trader business.

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