Sole Proprietorship Business Meaning Characteristics Advantages

Mon, 09/21/2015 - 02:02 -- Umar Farooq


In Sole proprietorship business organization entrepreneur (individual) introduces his own capital, uses his own skills to manage and responsible for the results profit or loss. Unlike Limited Liability Company LLC or Corporation it does not need to be registered with the state. If you are starting a new business as a sole proprietorship, registration is not necessary however there might be some complication for startup business like business license, registration with local authorities or any permit laws if needed. Owner should also have consider income tax and business debt issues because he is the one paying all his debts.

It is the easiest  way to set up a sole proprietorship business which is also known as individual entrepreneurship. The individual invests and manages the entire affairs of the enterprise. He takes all the decisions whether managerial, financial or operative and all other. Be owns and controls. He is responsible solely for the entire operating results. A sole proprietorship name might be the name of owner or under any fictions name for example “Mano Saloon”. It is just a trade name and there is no issue of separate business entity.


“It is a business unit whose ownership and management are vested in one person. The individual assumes all risks of loos or failure of the enterprise and receives all profit from its successful business operations” Paterson and Plowman


  1. Individual ownership.
  2. Individual control.
  3. Individual management—the monarch.
  4. Undivided sole responsibility of business obligations and operating results.
  5. To a larger extent no government regulation While setting business on the basis of sole proprietorship

Advantages and Disadvantages of Sole Proprietorship


Ease in formation. When starting sole proprietorship, no legal formalities are required to be gone through. Because of this it is easy to form such a business organization. J. L Lundy has said that "becoming a proprietor is as simple as buying newspapers for 3 cents and selling them on a street corner for a nickel (five cents)", thus, by investing 3 cent a newspaper, the purchaser (in this case the sole proprietor), earns two cents.

Any person who decides to start a business enterprise of any kind and enjoying the capacity to run it skillfully enters into business contact, sets up the organization and goes ahead with the operation. However, in some type of businesses license may be required to be obtained under the law of the land. That formality can also be easily completed.

Personal Care. Solo proprietor is the monarch of his business enterprise. He, looks after his business himself. He can easily take care of all wastages, losses etc. and takes corrective measures. He can take care of his customers personally and serves his customers with all care catering according to their taste and temperaments, likings and disliking.

Motivation. He is a motivated proprietor. He knows for all profits and losses. He is solely responsible, therefore, he does his utmost to avoid all lapses and works hard to earn as much as his capacity persists him.

Coordination is Facilitated. Certainly a sole owner can easily and effectively coordinate his efforts with success. He is the sole decision maker. He can, therefore, co-ordinate not only his own efforts but the efforts of his employees also which, thus, ensures a better team work.

Prompt Decision Making. It is another advantage of form of organization. Since the sole-proprietor need not consult anyone in decision making he can be prompt enough in whatever he has to decide. This helps him in taking advantage of the opportunities which come in his way.

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