Sole Proprietorship

Do you know About Sole Proprietorship?. If you want to know about sole properietership read the full article and get some imprtant information.

Sole Proprietorship

  • This is the oldest kind of business.
  • A sole proprietorship is the type of business for which the single owner provides capital for business, assumes all risks of business, and organizes the business independently.
  • The success of this business depends on the personal qualities and talents of the businessman.
  • One man business is the best in the world If only that one man has the capacity to manage everything. Unfortunately, such a person does not exist so the soleproprietorship is limited to small scale business.

Merits Of Sole Proprietorship

Simplicity In Formation:

it is quite easy to form a business as a sole proprietorship Its formation does not require any permission from the government

Simplicity In Dissolution:

It is quite easy to dissolve sole proprietorship. No much time or cost is required in bringing it to an end. But it is quite difficult to dissolve the company.

Low Cost:

The formation of a sole proprietorship does not involve any formation cost. On the other hand, the formation of a company involves heavy expenditure.

Contacted With The Customers:

In a sole proprietorship, a businessman has direct contact with the customer and keeps in mind the likes and dislikes of the public while producing his products.

Direct Relationship With Workers:

In a sole proprietorship, a businessman has a direct relationship with workers. He can better understand their problems and then tries to solve them.

Ownership Of All Profits:

A sole proprietorship has only a single owner and hence it has no concept of distribution of profit. So the whole profit owned by a single person.

Easily Transferable:

Such type of business can easily be transferred to another person without any restriction.

Tax Saving:

Sole proprietorship enjoys the advantage of saving various types of taxes. In this form of business income tax on owners is imposed once. But in the case of twice. company the income tax is impose.

Personal Interest:

In this form of business, the owner takes personal interest and offers a maximum of his services and energy for the growth of his business.

Minimum Legal Constraint:

The company and the partnership have to follow many laws, rules, and regulations from which the sole proprietorship is exempted.


No printing and publication of accounts are required in sole proprietorship business, the financial matters could be kept secret while it is not possible in the Company’s business.

Favorable Credit Standing (Unlimited Liability):

A sole proprietor has unlimited liability. In case of insolvency of business, even the personal assets are use the owner to pay off the debts and other liabilities.

Freedom Of Action:

Sole proprietorship enjoys the freedom of action This freedom saves the business from complication and waste of time.

Quick Decisions:

A sole proprietor can make quick decisions for the development and welfare of his business and in this way can save his time.

Sole Proprietorship

Demerits Of Sole Proprietorship

Uncertain Life:

The life of the business depends on the efficiency or life of a single owner. If the owner is inefficient or dies the business will come to an end.

Unlimited Liabilities:

If the assets of the business are insufficient to discharge its liability then the proprietor make up the deficiency from his personal resources

Limited Size:

The business usually doesn’t grow to a high level because of the limited amount of capital and non- availability of highly qualified personnel.

Difficulties In Management:

Because its management is in the hand of low or non-qualified personnel so it causes difficulties in running the business smoothly.

Lack Of Opportunities For Employees:

A soleproprietorship does not offer career opportunities to its employees because of its limited size.

Expansion Difficulty:

In a soleproprietorship, it is very difficult to expand the business because of the limited life of proprietors and limited capital.

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Final Thought:

From the above-mentioned detail, we come to the point that despite the above disadvantages, a soleproprietorship is an important form of business organization. This is due to the fact that its formation is very easy and due to unlimited liability the owner takes great care and interest in the business because, in case of loss, he is personally responsible. As he enjoys entire profit, this factor also encourages him to work with great efficiency which promotes his business.

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