Sole Proprietorship in simple words is a one-man business organization. It is the type of entity that is fully owned and managed by one natural person (not a legal person/entity) known as the sole proprietor. The business and the man are the same; it does not have a separate legal entity. A sole proprietorship usually does not have to be incorporated or registered. It is the simplest form of business organization and the ideal choice to run a small or medium scale business. Here in this article let us understand what are the features of a Sole Proprietorship firm in India.
Features of Sole Proprietorship
- Lack of Legal Formalities
A sole proprietorship does not have a separate law to govern it. So there are not many special rules and regulations to follow. It does not require incorporation or registration of any kind. In most cases, only a license is required to carry out the desired business.
- One Person Ownership
A sole trading concern is owned by one individual. It is run entirely at his risk of loss. The sole trader provides both capital and management to the business.
- Unlimited Liability
Since there is no separation between the owner and the business, the liability of the owner is also unlimited. So if the business is unable to meet its own liabilities, it will fall upon the proprietor to pay them.
- Risks for Profit and Loss
As a Sole Proprietor, he will be responsible for his own profits and losses. Since he is the only one financially invested in the company, he must also bear all the risk. If the business fails or suffers losses he will be the one affected.
Just as we saw above the business and the owner have one identity. So a sole proprietorship is entirely dependent on its owner. The death, retirement, bankruptcy. insanity, imprisonment etc will have an effect on the sole proprietorship. In most of the cases, the proprietorship will cease to exist and the business will come to an end.
- One Man Control
A sole proprietorship is a one-man show. The sole trader provides management to the business. He takes all the decisions, procures material resources, employs persons and directs and controls the affairs of the enterprise. He is not required to consult anyone else in taking any decision. Though the sole trader may delegate some of his authority to his assistants the ultimate authority to manage and control rests with him.
Here in this article, we have understood the features of a Proprietorship firm registration in India, it will surely be useful for you to grow your business. If you’re wondering for Sole proprietorship company incorporation then you should visit the Online Sole proprietorship registration portal.
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