characteristics of sole proprietorship

Characteristics of sole proprietorship :-

These are many characteristics and feature about sole proprietorship. I can explain all the features and characteristics in points.

Simple ownership :-

A trader is the owner of business. The owner provides necessary capital. The persons can start business like a repair shop, general store, dry cleaning and so on.

Small capital :-

The sole proprietorship provides the whole capital. At the start the owner brings money and other assets from private sources. The need for more capital can be met out of borrowed funds.

Unlimited liability :-

The liability of the sole proprietorship is limited. The proprietor is liable to bear all the losses of the business. When all the resources of the owner are used to pay business debts the liability become unlimited.

Sole management :-

The sole proprietorship manages the whole business. The management depends upon his skills, experience, qualification and personal abilities.

Small size :-

The size of the business is very small. The sole trader can serve the customers in local area. The limited abilities and small capital do not allow expending the size of the business. The small size is suitable for the customers who want personal attention.

No separate entity :-

The owner and the business are not separate from each other. The life of the business linked with the owner. When the owner dies, the business come to an end.

Whole profits :-

The owner of the business takes the whole shares of profit earned by the business. If there is loss he himself is responsible for it. The effort and reward and linked with each other.

No registration :-

There is no special law for registration of sole proprietorship as compared to other types of businesses. The general law of the land is applicable on sole proprietorship.

Complete secrecy :-

The sole trader manages the whole business. The owner takes all the decisions alone. All the business secrets are kept by him. The accounts are not published in newspapers for public.

Natural person :-

The sole trader is a natural person. The law provides equal chance to both men and women to run lawful business. All people can perform functions of management.

Business risk :-

The risk of loss is basic element of a business. There may be a period of bad trade. The change in technology is a threat to old business. The management bears this risk with courage.

Lawful work :-

The sole trader can start business which is allowed by government. Any work cannot be allowed which is against public interest. The law of the country must be followed before starting any business.