sole proprietorship and its characteristics | ownership| tradership

INTRODUCTION:

 The individual proprietorship or sole proprietorship is the oldest form of business organization. It is as old as the civilization itself. Historiscally, it appears that business started first with this form of organization. It is the simplest and natural type of organization.

Sole proprietorship is also called individual proprietorship, or one man business. Sole proprietorship is a form of business organization in which an individual introduction his own capital, uses his own skill and intelligence in the management of its affairs, assumes all the risks of business and is solely responsible for its results of its operations. He, thus, owns all and risks all. The business is exclusively in the hands of an individual. Most the bakery, hardware stores, service stations, barbers shop, dockter’s clinic, beauty parlours, etc. are examples of sole proprietorship.

One man business is usually small but it can be a large as a steel mill or a departmental store depending upon the resources available to the entrepreneur.

DEFINITIONS OF SOLE PROPRIETORSHIP:

Some of the important definitions of sole proprietorship are as follows:-

1]. PATERSON AND PLOWMAN:

 “A Sole proprietorship is a business unit whose ownership and management  are vested in one person. The individual assumes all risk of loss ar failure of the enterprise and receives all profits from its successful operation”.

2]. JAMES STEPHENSON:

 A sole trader is a person who carries on business exclusively by and for himself. He is not only owner of the capital of the undertaking but is usually the organizer and manager and takes all the profits or responsibilities for losses”.

CHARACTERISTICS OF SOLE PROPRIETORSHIP:

The main characteristic of sole proprietorship are as under:-

sole proprietorship and its characteristics

1}-OWNERSHIP:

 The business is owned by a single individual.

2}-MANAGEMENT AND CONTROL:

 Being small In size, it is managed by the owner himself. However, he may have some paid workers to assist him. In any case, the ultimate control rests in his hands.

3}- FINANCE: 

The necessary capital to run the business is provided by the sole owner. However, he may borrow from other sources such as friends or bank as need arises.

4}- RISK: 

The proprietor himself bears all the risks. No body else has any stake in the business.

5}- UNLIMITED LIABILITY: 

The sole trader is personally liable for debts of the business. The creditor can lay claim not only on his business assets but also his personal property such as car, houses, furniture etc to recover the loan.

6}-LEGAL STATUS:

 In law, the sole trader and his business are considered as one. In other words, all the assets and liabilties of the business are the personal assets and liabilities of the proprietor. We can say that the owner and the business exist together. In other words, the two are considered as one in the eyes of law.

7}-RELATIONSHIP WITH CUSTOMERS:

 The sole trader tries to keep good relationship with his customers. The customers are generally personally known to the proprietor and their orders are higher valued.

8}-NO LEGAL FORMALITIES:

 The sole trader can set up or close the lawful business as and when he likes. The operation of his business in not governed by any special act or ordinance.

9}-EASE OF DISSOLUTION:

 The sole trading business is as easy to end or dissolve as is its formation. The decision of the proprietorship alone ends the business.

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