Question

What do you understand by Sole Proprietorship? Outline its features.

Answer 1

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. A sole proprietorship can operate under the name of its owner or it can do business under a fictitious name, such as Nancy's Nail Salon. The fictitious name is simply a trade name--it does not create a legal entity separate from the sole proprietor owner.

Following are the salient features of the sole-proprietorship, as a form of business organisation:

• There is individual ownership, in sole-proprietorship. One man alone-called the sole- proprietor is the owner of all assets and resources of business.
  
• The sole proprietor is solely responsible for the management of his business enterprise. The sole proprietor may engage the services of professional managers; yet it is he who is responsible for regulating the decisions and actions of hired managers.
  
• The sole proprietor is solely responsible for arranging finances for his business. He has to contribute capital from his own sources. He may also borrow money from friends, relatives and others-at his personal risk. Because of limited financial capacity of one individual (in majority of cases, of course), the size of one-man business is usually limited.
  
• In one man business (i.e. sole proprietorship), there is independent decision-making by the sole proprietor. He need not consult with others; while taking decisions for his own business.