Sole Proprietorship

Business Knowledge

This name itself tells the story. Sole means the single person and proprietorship mean owner that means sole proprietorship is that single entity that runs the business and manages the organization.  A sole proprietorship is a single entity that enjoys the independence of the business organization. In this single person owns, manages and controls, all the business activities, and the individual who operates the business.

From the business point of view, the sole proprietor is only responsible for starting the business, bearing all the risks of the enterprise, and also for manages all the activities and operations single-handedly. And the owner has to arrange various resources in a systematic way, with the motive to earn profit. The owner is only responsible for all the decisions which are taken in the business and  All the profits earned by the business go to the owner’s hand and alone he/she will enjoy. and when the loss occurs alone owner will bear all the losses.

Features of the Sole proprietorship

 Sole Proprietorship

Single Ownership

In this, a single person, handles all types of business units and departments or the entire business, i.e. all the assets and property of the business belong to the owner of the business. The owner has to handle all the risks which occur in the business. 

No sharing of Profit and Loss

 Whatever income generated from the business belongs to the sole proprietor only. The sole proprietor alone handles all the losses and profits of the firm. No sharing of profit and loss took place.

One man’s capital

All the investments, which is required to start the business or to continue operations are arranged by the business owner only, either from his personal resources or from the bank, financial institutions, friends, relatives, etc.

Unlimited Liability

 This is one of the major drawbacks of a sole proprietorship business. Every business has unlimited liabilities. When the loss occurred, all the personal assets of the owner along with the business assets can be used to give the dues. 

Less Legal Formalities

 The legal formalities in the sole tradership business are almost nil, also they do not require registration. they can only be registered with local self-government, and obtain a certificate of registration.

One man Control

 As only one person is in charge of all the activities, he has full control over them and also having decision power. the owner makes all the decisions itself and executes them according to the requirement.

Advantages of a Sole Proprietorship

  • Easy and inexpensive to form: A sole proprietorship is a simplest and very less expensive business to establish. The setup costs are also very less and the legal costs are also less.
  • Complete control. Because you are the owner of the business, you are having full control over the business, and all decisions making working is belongs to you. You don’t need to consult anyone and whatever decision you can make and change it. You are fully independent.
  • Easy tax preparation. you are the only owner of the business, so no separate tax is prepared and it will easy to file the tax reporting requirements for a sole proprietorship. 
  • You can Easily legalize your work formation.
  • Directly you will motive yourself and employees to increase efficiency and achieve the desired goal
  • Your secret of business maintenance will never be disclosed because you yourself manage the work. 
  • You Quickly make a decision in favor of your business 
  • You will get good control on the business
  • Your business operation will be flexible
  • You can make Close personal relation will the employees.

Disadvantages of a Proprietorship

  • A large number of personal liability. Because there is no legal difference between you and your business, personally you are handling all the debts and obligations of the business. 
  • Hard to raise funds. Sole proprietors often face challenges when you are trying to raise funds. You cannot sell stocks, which will create problems like limits investor opportunity, Banks are also hesitant to give loans.
  • Heavy burden. On one side, there is complete control and on another side, there is full burden and pressure of the work. You alone are responsible for the success and failure of your business.
  • You have a limited number of resources
  • When you are alone handling everything then you have Limited managerial ability to handle the business.
  • When you are having a problem or issue you must face a continuity problem.
  • You are alone not able to increase the size of the business.
  • Every business has so many liabilities.

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