Sole Proprietorship (Definition, Sources of Capital, Characteristics)

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This is a business enterprise formed and owned by one person. It is usually small, simple and easy to set up. It is otherwise called one man business

Sources of Capital

The sole proprietor sources his capital from any of the following:-

1. He raises his capital from past personal savings.

2. Profits from the business can be ploughed back

3. Loan can be obtained from the banks.

4. Gifts from family members, friends or inheritance from the late parents etc.

5. He can borrow from his friends and relations

6. He can engage on trade credit – ie. buy goods on credit

7. Personal properties can be sold to raise capital

1. Ownership: The business enterprise is owned by one person

2. Objectives: The main objective of the one man business is to make profit

3. Source of Capital: The capital required to set up and run the business is provided by the proprietor.

4. Liability: The sole proprietor has unlimited liability

5. Legal Entry: It is not a legal entity as the owner is not separated from the business

6. Management: The business is controlled and managed by the sole proprietor himself.