SOLE PROPRIETORSHIP is a form of business organization which is owned, controlled and managed

by a single person who is the recipient of all profits and bearer of all risks/losses.
Suitability:
Sole Proprietorship requires less capital hence it is best suited for the following businesses:
1. Business which is carried out with the modest capital and limited managerial talent. Eg:
grocery store, medical stores, bakery shops etc.
2. Business where customers personalised services are in demand such as hair cutting salons,
beuty parlours, tailoring shops, dry cleaning etc.
3. Business producing artistic goods like embroidery, jewellery etc.
Features:
Individual Ownership: The business is owned by a single person.
Unlimited Liability: In case a firms assets are more than its liabilities. The proprietor may
have to sell its personal property in order to pay off its debts.
Formation and Closure: Hardly any legal formalities are required to start a sole
proprietorship business. Closure of the business can also be done easily.
No separate entity: in the eyes of law, there is any distinction between a sole proprietor and
his business.
Merits:
Quick Decision Making: A sole proprietor enjoys full freedom in making decision without
consulting anybody.
Sense of Accomplishment: If the business is successful, it adds up to the level of satisfaction
in the sole proprietor and gives him a sense of accomplishment.
Formation and Closure: Hardy any legal formalities are required to start a sole
proprietorship business. Closure of the business can also be made easily business. Closure of
the business can also be made easily.
Direct Incentive: A sole proprietor gets direct benefits of his work since he is the only
recipient of profits and gains.
DEMERITS
Unlimited Liability: If the business assets of sole proprietary business are more than its
liabilities, the personal assets of the proprietor may be used to pay off its debts.
Limited Resources: Resources of a sole proprietor are limited to his/her personal savings or
borrowings from others. Banks may hesitate to extend long term loans to a sole proprietor.
Limited Life of business: Since the business and the owner are one. Death, imprisonment,
insanity will cause automatic closure of the business.
Limited Managerial Ability The owner of a sole proprietorship business needs to take up all
the responsibility of the business which may include purchasing, selling, financing,
maintaining accounts. Sine, the resources are also limited, the proprietor is unable to emply
talented employees.