A sole proprietorship is a form of business ownership in which the company is owned and managed by one person only. Sole proprietorship can be compared to fisherman’s boat since fisherman’s boat is small there are many risks if one takes that boat in sea but rewards are also great and sole proprietor can be compared to master of that boat and he or she has to sail through the ups and downs of business in order to earn rewards in the form of profits. It is perhaps the simplest and basic form of business ownership where there is no complex legal problem which is the case with company or problem of profit sharing which is the case with a partnership. Let’s look at some of the important features of sole proprietorship –
- The first and foremost feature of sole proprietorship is that it is the owner who brings capital from his or her own sources and also whether profit or loss is taken by the owner himself or herself and the owner does not have to share the profits with partners as is the case in partnership or with shareholders as is the case with company.
- Autonomy in decision making is another benefit of sole proprietorship because the owner of the business is alone he or she can take decision what he or she wants and does not has to worry about taking consent of other partners as is the case with partnership firm or shareholders consent as is the case with listed companies.
- Another feature of a sole proprietorship is that its life is limited and in the event of a death of the owner the business also ends, hence in a way, this form of business is completely dependent on the health of the owner.
- This firm of business can be created easily and quickly without many legal formalities and hence any individual looking to start a business can do it within a short span of time.
- Another feature of this form of business is that sole proprietor can take a decision quickly according to the situation and therefore it has great flexibility which is not the case with partnership firm or limited company.
- Since the owner himself or herself is taking all decisions there is no ambiguity as the owner himself or herself is responsible and accountable for all the happenings in the company.
- The liability of the sole proprietor is unlimited and in the case of loss of the business personal property of proprietor can also be used to make good the loss which is not the case in case of companies where the liability of shareholder is limited to an amount of shares hold by him or her only.
As one can see from the above that sole proprietorship has many features which are unique to this form of business ownership only and any individual thinking about starting his or her own business should look at above features and then decide whether it is beneficial to start a sole proprietorship or not.