What is Sole Proprietorship?
The sole proprietorship is the simplest and oldest business form. The enterprise is owned and controlled by one person. The sole proprietorship is not a legal entity. In sole proprietorship, a person owns the business and is personally responsible for its debts.
Features of Sole Proprietorship
Some of the features of sole proprietorship are as follows.
1. The sole proprietorship is simple and easy to set-up.
2. Only one man is the owner of the enterprise.
3. A person owns the business and is personally responsible for its debts.
4. There is no separate distinction between the business and the proprietor.
5. The personal property of the proprietor is also liable for meeting the business obligations.
6. The proprietor is the manager of the business concern.
7. The proprietor enjoys all the profits of the business and responsible for all the losses.
Advantages of Sole Proprietorship
The following are some of the advantages of sole proprietorship.
1. It is easy to set up sole proprietorship.
2. It is a simple form of organization.
3. The proprietor enjoys full freedom and can take quicker decisions without any interference.
4. Income and losses are taxed on the individual’s personal income tax return and the income is taxed only once.
5. It is easy to dissolve sole proprietorship.
6. Since the proprietor is the manager of the business concern, secrecy can be easily maintained.
Disadvantages of Sole Proprietorship
The following are some of the disadvantages of sole proprietorship.
1. Sole proprietorships do not survive in the event of any incapacity of the owner.
2. Proprietors are the managers and hence they may have limited skills to manage business.
3. Sole proprietorship does not expand very quickly due to limited abilities of the owners.
4. The owner of a sole proprietorship remains personally liable for all the business’s debts.
5. Proprietors who are the owners cannot raise capital by selling an interest in the business. Hence, sole proprietorship has limited resources.