Sole proprietorship refers to a form of business organization which is owned, managed and
controlled by an individual who is the incipient of all profits and bearer of all risks. The word “sole”
implies “only” and “proprietor” refers to “owner”. Hence, a sole proprietor is the only owner of a
business. This form of business is particularly common in small scale business and areas of
personalized services.
Features of Sole Proprietorship:
(i) Formation and Closure :Very few legal formalities are required to start a sole proprietary business,
except in the fields where a license is required. Closure of the business can also be done easily.
(ii) Unlimited Liability :Sole proprietors have unlimited liability. This implies that the owner is
personally responsible for payment of debts in case the assets of the business are not sufficient to
meet all the debts.
(iii) Sole Risk Bearer and Profit Recipient :The sole proprietor bears the risk of failure of business all
alone and also receives all the business profits which are a reward for his risk bearing.
(iv) Control and Decision :Making The sole proprietor has the absolute right to run the business and
make all decisions regarding the business without any interference from others. He is the king in all
aspects.
(v) No Separate Entity :No distinction is made between the sole proprietor and his business in terms
of law as business does not have an identity separate from the owner. The owner is, therefore, held
responsible for all the activities of the business.
(vi) Lack of Business:Continuity Sole proprietorship lacks continuity as death, insanity,
imprisonment, physical ailment or bankruptcy of the sole proprietor will have a negative effect on
the business and may even cause closure of the business.
