Commercial Applications
State three characteristics of sole proprietorship.
Sole Proprietorship
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Answer
Three characteristics of sole proprietorship are:
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. There is no partner or co-owner in the business.
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. Some persons may be employed to help the owner, but ultimate control lies with the proprietor.
Unlimited Liability — The proprietor is personally liable for all the debts of the business. In case the assets of the business are insufficient to meet its debts, the personal property of the proprietor can be attached to pay creditors.
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Related Questions
Meera runs a bakery. Due to a drop in demand for cakes, she starts focusing on cookies and bread. She quickly adapts her business to market trends without needing approvals. Which merit of sole proprietorship does this demonstrate?
- Unlimited liability
- Secrecy of operations
- Flexibility of operations
- Lack of continuity
The liability of a sole proprietor is limited to the assets of the business.
- True
- False
Mention two limitations of sole proprietorship and of joint Hindu family business.
In a joint Hindu family business, the karta takes an important decision to invest in a new venture without consulting the other members. How does this reflect the karta's role and authority in this type of business?