What are the Characteristics of Sole Proprietorship form of business?

Characteristics of Sole Proprietorship:

The following are the main characteristics of a sole proprietorship:

1. Single ownership:

The most important characteristics of sole proprietorship are that the ownership management and control of the organization is vested with that individual only.

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2. Capital contribution:

In this form of business organization, the capital is contributed by the sole proprietor from his own resources. If he requires more finance, it may be borrowed from his friends and relatives.


Thus the invite burden of capital requirement for this business is the sole responsibility of the owner. He may arrange it from its own or by borrowing of his own risk.

3. No separate legal existence:

No distinction is made between the enterprise and its owner and both are looked upon as one any same person. Death or insolvency of the sole proprietor brings his business to an end.

4. One-man control:

The sole proprietor is personally responsible for the control and management of enterprise. There is no interference from any person in the management.

He has full authority to take decisions for guiding the destiny of the enterprise. Thus, sole proprietorship is a one-man show.

5. Unlimited liability:


The liability of a sole proprietor is always comprehensive and unlimited. The personal property of the proprietor would also be used to pay off the debts and loans of any incurred from the outsider if the business assets one insufficient to meet such of outsiders in case liabilities of the enterprise cannot be paid out of assets of the enterprise.

This provides a check on the reckless actins of the sole proprietor.

6. Limited area of activities:

As a result of limited finance and managerial ability, the sole proprietor has a limited area of operation. Unlimited liability also restricts the proprietor from taking bold decisions and expands its area of operations.

7. No legal formalities:

There are no legal formalities in order to start a sole proprietor form of business. Any body and everybody can start the business any time any every where so also they can dissolve the same as per their wishes.


Because it is subject to minimum legal formalities and government restrictions but full delineation of sole trader.

8. Freedom of line of business:

The sole proprietor is free to select any business of his choice. It provides an excellent opportunity for self-employment, especially for those who have limited amount of finance.

He can easily switcher and expand its business activities. He has the liberty to decide everything of his own.

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