An entrepreneur may single handedly owned, controlled and managed the business or a group of persons may take up the same task. When it is owned and managed by a single person it is called sole proprietorship form of business.

The ownership and management by a group of persons may take the form of partnership, joint stock company or cooperative form of business. Joint stock company and cooperative society belong to the corporate forms of organisation and sole proprietorship and partnership are non-corporate forms of organisation. Besides these forms, Hindu Undivided Family (HUF) also undertakes business in India.

However, the form of organisation has lost its importance over the years with the gradual declining of the Joint Hindu Family system. The earliest and the oldest form of business organisation is the sole proprietorship. The area of operation of such business was limited and it was carried on in a small-scale basis.

Meaning of Sole Proprietorship:


Sole proprietorship is the oldest form of business organization. It is also known by other names such as Single Proprietorship, Individual Proprietorship, Sole Trader Business etc. It is as old as civilization. It is the most Common form of organization for business on a small-scale. The sole proprietor or entrepreneur solely makes the investment, manages the business, enjoys the entire profit or bears the entire loss and exercises absolute control over the business. He may take the help of his family members or employ few persons to manage the business but he is his own master. Its formation is very easy and simple.

Anybody can start a business of this form. There are no legal formalities for starting this form of business excepting in few cases where a license is to be obtained. In the eyes of law, there is no distinction between the business concern and the proprietor.

Definitions of Sole Proprietorship:

Sole proprietorship is a form of business organization in which an entrepreneur has to carry out a business and invests his own capital, uses his own skill and intelligence in the management of its affairs and is solely responsible for the results of its operations.


J. L. Hanson defines it as “a type of business unit where one person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of business.”

In the words of L. H. Haney, it is “the form of business organization on the head of which stands an individual as the one who is responsible, who directs its operations, who alone runs the risk of failure.”