Most important features of sole proprietorship form of organization are as follows:
Formation and Closure: Barely, any legal formalities are required to set up a sole proprietary business, though in certain cases one may need a license. There is no separate law that governs sole proprietorship. Dissolution of the business is also done easily. Thus, there is no difficulty in formation as well as closure of business.
Liability: Sole proprietors have limitless liability. This implies that the owner is personally responsible for the business payment of over dues or debts in case the assets of the organization. The business is not adequate to meet all the debts. At this instance, the owner's individual possessions such as his/her personal car and other belongings may have to be sold for repaying the debt. For instance, the total outside liabilities of XYZ , a sole proprietorship organization are Rs. 80,000 at the time of closure, but its assets are Rs. 60,000 only. In this situation the proprietor has to put in Rs. 20,000 from his/her personal sources even by selling her personal assets to repay the firm's debts.
Sole Risk Bearer and Profit Recipient: The risk of collapse of business is borne solely by the proprietor. Nevertheless, the business is successful, the proprietor is entitled to enjoy all the benefits. He is the recipient of all the profits derived from his business which is a direct reward for bearing the risk factor.
Control: The authority to run the business and the decision-making lies entirely with the sole proprietor. He can accomplish his plans without anybody's intervention.
No Separate Entity: In the eyes of the law, no difference is seen between the sole trader and his business, as business there is no identity. Sole trader is a form of business entity where a person is solely accountable for providing the capital, to bear risk of the enterprise and the administration of business. The sole proprietorship is a type of business organization where the head of the organization is an individual who is accountable, responsible, directs its operations and who alone runs the risk factor. Detach from the owner. The owner is, therefore, answerable for all the activities of the business.
Lack of Business Continuity: As the owner and business are one and the same entity, death, insanity, imprisonment, physical ailment or bankruptcy of the sole proprietor will have an unswerving and negative effect on the business and may even cause closure of the business. consult others. This may lead to well-timed capitalisation of market opportunities as and when they arise.
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