What is a Sole Proprietorship and its characteristics

What is a Sole Proprietorship and its Characteristics-min
What is a Sole Proprietorship and its Characteristics-min


In a sole proprietorship, there is only a single person who manages and runs the business alone. 


Meaning Sole Proprietorship?

The business which is owned and managed by a single person is called as a sole proprietorship. In other words, it is a one-man army because the owner of this business is having overall control over all the activities. This type of business is having very less legal formalities as compared to other types of businesses (partnership,joint-stock companies) etc.

What is Sole Proprietorship and its characteristics - Explained with Animated Examples


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Definitions of Sole Proprietorship: 

Sole trader business is a type of business unit one where one person is solely responsible for providing the capital, for bearing the risk and for the management of the business.

– J.L.Hansen


The sole proprietorship is the supreme judge of all matters pertaining to his business subject only to general laws of the land and to such special legislation as may affect his particular line of business.

– Kimball and Kimball

The sole proprietorship is the form of business organisation at the head of which stands an individual as one who is responsible, who directs its operations and who alone runs the risk of failure.

– L.H.Haney

Characteristics of a sole proprietorship:

There are various features/characteristics of a sole proprietorship which are given below:

1) Private/Single Ownership: 

The sole proprietorship firm is owned by a single individual only, that’s why it is called as single ownership. In this type of business, all the capital is invested by the owner.


There are very fewer formalities to start and close the business and also no separate law governing this form of business.

3)Decision Making:

Because in this type of business there is only one owner so he can take all the decision on its own. 

4) Fund Raising:

In this type of Business, the owner can only raise fund by taking loans from other financial institutions. For example loan from the bank.

5) Share of Profit/Loss:

In the type of business, the owner is the only person who runs the business alone that’s why all profit is enjoyed by the owner only and all loss will bear by the owner.

6) Governed by Act:

For this type of business, there is no such act is available. It is the owner’s wish to start or to close the business but in partnership and other businesses are having separate acts/laws.

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