Characteristics of Sole proprietorship

Characteristics of Sole proprietorship

In this article some important characteristics of sole proprietorship have been discussed.Sole proprietorship is a form of business, which is run & managed by a single person. Characteristics of sole proprietorship include personal unlimited liability, no sharing of profit, difficulty in arranging finance, small scale operation etc. These characteristics have been briefly explained below

1.   Personally unlimited Liability

First characteristic of Sole proprietorship is personal unlimited liability of the owner of the business. It means that, in case of liquidation, if the assets of business are not sufficient to pay the liabilities of the business, then these liabilities shall be paid from the personal asset of the owner.

2.   No Profit Sharing

Second characteristic of Sole proprietorship is none sharing of profit. being the sole owner of the business, the sole proprietor enjoy all the profits earned from the business, he is not required to share the profits with other partners or shareholders like companies and partnership. This is one of the main advantage of Sole proprietorship. 

3.   Finance Arrangement

Third important characteristic of Sole proprietorship is its limited creditability & acceptability in the financial market as compared to the corporate business (companies), thus this type of business faces difficulty in arranging finances from the financial institutions.

4.   Small Scale Operations

Another important characteristic of sole proprietorship is its limited or small scale operations. Normally sole proprietorship manages the small scale businesses due to limited financing. Large businesses set ups are normally run by the corporate entities (companies).

5.   Control weakness

Other key characteristic of Sole proprietorship businesses is its control weaknesses. Sole proprietorship is run by an individual according to his understanding and knowledge of the business. Thus sole proprietorship have many control weakness as compared to corporate business, which is run  by the professional managers.

6.   Easy to set up & Wind up

Sole proprietorship can easily be set up and does not involve many legal formalities for set up. Similarly winding up process is simple and straightforward. Easy set up & winding up is an important characteristic of sole proprietorship.

List of important characteristics of Sole proprietorship

1.    Sole proprietorship is personally liable for business liability.

2.    Sole proprietorship enjoys all the profit of business.

3.    Sole proprietorship has limited funds.

4.    Sole proprietorship business is subject to many control problems.

5.    Sole proprietorship business is easy to set up & wind up.

6.    Decision making process in sole proprietorship is fast.