Proprietorship : Definition and Characteristics

Introduction to Sole Proprietorship

Sole trader-ship or proprietorship is the oldest form of business in all the countries of the world. Along with the progress of the business, its form has also been changing. But due to its simplicity, quick formation, and easiness, this form is the most popular and in practice in the world.

One man’s business is best in the world if that one man is big enough to manage everything.

Meaning of Sole Proprietorship

Sole trader-ship (proprietorship) is a form of business organization whose owner is just one person, who is called the sole trader. This person invests capital in the business and is solely responsible for all the profits and losses of the business. The same person is the manager and organizer of the business.


According to Prof Hynes

Sole Proprietorship is that form of business that has a single owner, who has the total responsibility of the business, who runs the business and also bears the risk on the failure of business.

Despite high mortality, the sole entrepreneur survives.

In the words of Dr. John A Shubin

Under the Sole Trader-ship Business, a single man is an organizer; he is the owner and runs the business by his own name.

Characteristics of Sole Trader-ship (Proprietorship)

  1. Sole Ownership

    A single person is an owner of this type of business. That person is responsible for all the things relating to the business. He himself bears all the risk and organizes the whole business. On the closure of the business, he is personally liable for all gains and losses.

  2. Unlimited Liability

    The liability of a sole trader is unlimited. On the occasion of any loss in the business, not only the business assets but also the private assets of the sole trader (house, shop or land, etc.) can be sold for recovery of losses.

  3. Limited Work Area

    The work of a sole proprietor business is limited because the capital acquiring, and organizational skills of a person are limited. Thus, the progress of the sole proprietorship is limited to the resources of its owner.

  4. Sole Right on Capital

    The arrangement of Capital to be invested in the sole trade has to be done by the proprietor. Thus, he has full rights to the capital.

  5. Sole Management

    The sole proprietor is himself responsible for the control and management of the business. With the expansion of the business, the proprietor can organize staff for his convenience, but he himself is deemed to be responsible for the work done by the managers.

  6. No Legal Formalities

    To start the business of the partnership or Joint Stock Company, some legal formalities like registration, etc. are required, but the sole proprietor need not fulfil any such formalities before starting his business, and the business can be easily started.

  7. Free to Select his Business

    The sole proprietor can select any business according to his abilities and will and can make any changes in his selection of business when required.

  8. Wilful Commencement and Closure

    The sole trader can commence or close his business any time he wants. He need not fulfil any legal formalities for these.

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