As the name signifies sole proprietor is the natural person financing, managing and carrying out all related operations of his business solely. He runs his venture, bears all the risks and gains and becomes the masters of his business. He can adopt a trade name or business name which is other than his legal name to separate his personal connection.
WHO IS A SOLE PROPRIETOR?
WHO PREFERS THE SOLE PROPRIETORSHIP?
1. It do not have any complexities involved.
2. Owner is the sole earner of all the profits.
3. Control is not diluted and stays in one hand only.
4. Quick decision undertaking.
5. Personal touch and thus customer satisfaction.
WHAT ARE THE CHARACTERISTICS OF PROPRIETORSHIP ?
Ownership
As the sole proprietor, the business owner makes all business decisions. The owner controls and manages the proprietorship while creating and implementing changes. The sole proprietor may have several employees, but it is common for the sole proprietor to be the business’s only employee.
Unlimited Liability
As the sole owner of the business, the sole proprietor accepts complete responsibility for the business’s liabilities, as well as its income. The owner is financially responsible for the business’s debts, expenses and payables and creditors can garnish the sole proprietor’s personal income if the business falters or fails.As the sole owner of the business, the sole proprietor accepts complete responsibility for the business’s liabilities, as well as its income. The owner is financially responsible for the business’s debts, expenses and payables and creditors can garnish the sole proprietor’s personal income if the business falters or fails.
Risk
Since the sole proprietorship accepts all the risk, the proprietorship is often subject to less restrictive regulations than partnership and corporation entities. The sole proprietorship is not required to charter the business with the state, though the business may be required to register the business’s name and operations.
Easy Setup
Easy setup is one of the main characteristics of a sole proprietorship. Independent business entities, such as corporations and LLCs, must file business formation paperwork with a state agency before operating. Drafting the paperwork, filing it and receiving approval from the government can take weeks and cost Thousands of Rupees.
Easy Dissolution
Its dissolution is very simple because there are no legal restrictions required for its dissolutionand it can be dissolved at any time.
Management
By legal definition, a sole proprietorship can have only one owner. This characteristic means that the buck starts and stops with the owner. The sole proprietor does not have to answer to a board of directors or a business partner. There is no need to draft bylaws or a partnership agreement to control operations and management.
Flexibility
Sole proprietorship is very simple to change the nature of business according to change in market trends due to entire control and less resources. For example, a person who is doing the business of fast food may involve in the business of cloth at night.
Free from Legal Formalities
A sole trade business is not expected to meet any legal requirement. A sole trader may engage in any business unless license is required under law. Suppose, he wants to open a cloth shop or a grocery store, he will do it but if he wants to open a restaurant he will have to obtain a license before opening the same.
Secrecy
It is also an important characteristic of sole proprietorship. All the decisions are taken by the proprietor himself. He is in a position to keep his affairs to himself and maintain perfect secrecy in all matters.
