Explain : Features of Sole Proprietorship

The sole proprietorship firm has the following features:

1. Establishment and Termination: Establishing and terminating the sole proprietorship business is much easier than a partnership business. It does not require many legal formalities, as 90% of the proprietorship firms do not need a license certificate to start a business according to their wish. It can be started whenever a proprietor feels to do so. The most common example of a sole proprietorship business is retail shops handled by an individual.

2. Liability: In a sole proprietorship firm, the liability of its proprietor is unlimited. The debts of his business will be treated as his personal debts as well as all other liabilities incurred by the business during the life of its business will be considered as a liability of the proprietor, i.e., if there is any outstanding liability of the business first the assets of the business are sold to repay them, and if the assets of the business are not sufficient to pay off the debts, the proprietor has to pay them by selling his personal assets.

3. Sole Risk Bearer and Profit Recipient: As the sole proprietor is a single owner of his business, he is wholly responsible for the profit or loss of that business and has to bear alone whether the firm earns gain or faces loss.

4. Control: Control of business and decisions such as expansion, purchase, and sale are in the hands of the proprietor. He takes decisions for his business according to his decision-making ability and experience.

5. No Separate Entity: In the eyes of the law, the proprietor and the sole proprietorship firm both are treated as one entity. i.e., the business and the businessman will be considered as a single entity. Therefore, if any legal action taken on the product will be considered as legal action against businessman selling such product and vis- a- versa.

6. Inadequacy of Continuation of Business: In the sole proprietorship business, the business cannot go on without its owner. If the owner faces any health issue or if he dies, the business automatically gets terminated.

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