Sole Proprietorship

Sole proprietorship is a business owned, managed, and controlled by one individual. It is common in small businesses like beauty parlours, salons, and retail shops.

Features

• Formation and closure: Easy to start and close; minimal legal formalities.
• Liability: Owner has unlimited liability, meaning personal assets can be used to repay business debts.
• Risk and profit: Sole proprietor bears all risks and receives all profits.
• Control: The owner has full control over business decisions.
• No separate entity: Business and owner are legally the same.
• Lack of continuity: Business may end with the death or incapacity of the owner.

Merits

• Quick decisions: No need to consult others; fast decision-making.
• Confidentiality: Business information remains private.
• Direct incentive: Owner keeps all profits.
• Sense of accomplishment: Personal satisfaction from owning the business.
• Ease of formation and closure: Minimal legal formalities required.

Limitations

• Limited resources: Owner's resources are often small; difficult to secure large loans.
• Limited business life: Business depends on the owner's health and well-being.
• Unlimited liability: Personal assets are at risk for business debts.
• Limited managerial skills: The owner handles all business tasks, which may affect performance.