What is Sole Proprietorship?
A sole proprietorship is a form of business organisation, that is owned, organised, and controlled by one person for the purpose of making a profit.
It is also known as sole trade or one-man business. It is the oldest and most common form of business organisation. The owner is called a sole proprietor or sole trader. Examples are petty traders, hairdressers, plumbers, fashion designers, etc.
The owner takes decisions alone and the business is not separated from the owner (Unlimited)
A sole proprietorship does not need to be registered or incorporated. It requires a small amount of capital to start operations.
Advantages of Sole Proprietorship:
- It is simple and costs little to run.
- It is easy to establish.
- The owner keeps all the profit and spends the proceeds as he or she wishes.
- The owner enjoys privacy.
- It is easy to manage.
- It requires a small amount of money to start.
- The owner enjoys a close relationship with his workers and customers.
- He or she chooses the location of the business.
Disadvantages of Sole Proprietorship:
- When indebted, the owner can sell the business.
- The death of the owner can lead to the end of the business.
- It cannot quickly expand because of a lack of large capital.
- It does not allow room for specialization.
- The owner bears all the risks of the business.
- They tend to lose their workers to bigger organisations since they are not likely to pay high salaries.
- They need to sell products at a higher price compared to bigger operators.