What is sole proprietorship? Describe its features.

Sole Proprietorship — Sole proprietorship is a form of business that is owned, managed and controlled by an individual. It is the oldest, commonest and simplest form of ownership. According to J.L. Hansen, "Sole trader business is a type of business unit where one person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of business." It is also known as a "one man show".

Features of Sole Proprietorship:

1. Single Ownership — A sole proprietorship is wholly owned by one individual. The individual supplies the total capital from their own wealth or from borrowed funds.

2. One-Man Control — The proprietor alone takes all the decisions pertaining to the business. They are not required to consult anybody. Ownership and management are vested in the same person.

3. No Separate Legal Entity — A sole proprietorship has no legal identity separate from that of its owner. The law makes no distinction between the proprietor and their business. If the owner dies or becomes insolvent the business is dissolved.

4. Unlimited Liability — The proprietor is personally liable for all the debts of the business. In case the assets are insufficient to meet its debts, the personal property of the proprietor can be attached.

5. No Profit Sharing — The sole proprietor alone is entitled to all the profits and losses of business. They bear the complete risk and there is nobody to share the profits or losses.

6. Small Size — The scale of operations carried on by a sole proprietorship is generally small. A sole trader can arrange limited funds and managerial ability. Therefore, the area of operations is generally local and limited.

7. No Legal Formalities — No legal formalities are required to start, manage and dissolve a sole trader business. Only a license is necessary in certain types of business.