Features of Sole Proprietorship - QS Study
QS Study

Features of Sole Proprietorship form of organization are as follows:

(i) Formation and closure: Hardly any legal formalities are required to start a sole proprietary business, though in some cases one may require a license.

(ii) Liability: Sole proprietors have unlimited liability. This implies that the owner is personally responsible for payment of debts in case the assets of the business are not sufficient to meet all the debts.

(iii) Sole risk bearer and profit recipient: The risk of failure of business is borne all alone by the sole proprietor. However, if the business is successful, the proprietor enjoys all the benefits.

(iv) Control: The right to run the business and make all decisions lies absolutely with the sole proprietor.

(v) No separate entity: In the eyes of the law, no distinction is made between the sole trader and his business, as business does not have an identity separate from the owner.

(vi) Lack of business continuity: Since the owner and business are one and the same entity, death, insanity, imprisonment, physical ailment or bankruptcy of the sole proprietor will have a direct and detrimental effect on the business and may even cause closure of the business.