Saturday, March 27, 2010


sole trader
Sole proprietorship has certain distinct characteristics. They may be explained below:

(1) Single Ownership : One person own the whole business. The business is exclusively in the hands of that person. He provides the entire capital either from his private resources or by borrowings.

(2) One-Man Management and Control : A sole trader himself organizes, manages and controls the business according to his desire and capability. He may appoint employees to help him in business activities. However, the sole responsibility of management lies on him.

(3) Unlimited Liability : This types of business organization has the drawback of unlimited liability. Hence, creditors are entitled to have claim even on his private property.

(4) No Sharing of Profit and Loss : The proprietor has the sole right on the profit of the business. Similarly if there is loss he has to suffer alone. Hence, he puts his efforts to increase profits. The profit and loss of a business is not divided among others. In the words of Gerstenberg, “ He owns all risk all”.

(5) No Separate Entity : Legally the proprietor and business are not separate entities. Loss in business is his loss and liabilities of the business are his liabilities. Hence, law makes no distinction between the proprietor and business. They exist together.

(6) Limited Operations : Sole Trading Concern has limited resources and managerial skills. Hence, it has generally a limited area of operations.

(7) Freedom : A sole trader can start any legal business according to his choice and means. He can start and close the business at any time without any formalities. According to the change his business without any difficulty. He can easily expand, change or reduce his business. There is no restriction on it. However, he cannot start any business on which some legal restrictions are imposed.

(8) Personal Relation : A sole trader has always direct relations with his customers. He is able to attend to every aspects of and attention are established under this form of organization e.g. doctor’s clinic, retailer, etc.


Post a Comment