The characteristics of sole proprietorship include various points to define the features of sole business. The points are:-
- Ownership of Business,
- Source of Capital Funds,
- No sharing of Profit & Loss,
- Single Man Control,
- Provide Employment Opportunities,
- Minimum Legal Aspects or Formalities.
1.Ownership of Business-
Ownership of a business is the first characteristics of sole proprietorship and in this type of business enterprise, there is an individual who manages and controls his business. That sole trader has both the authority and responsibility (i.e., ownership) of his business so that he manages the assets and liabilities of his business and as well as increases the growth of business also.
Because of the ownership, if he gets a profit from the business then the whole profits are received by the sole proprietor. Similarly, if there is a loss in business, then that loss has to bear it. The examples of sole proprietorship are- Medical stores, Grocery stores, Telecom shops, Vegetable stores, Food corners, Chemist shops, Stationery stores, and so on.
Management is the second Characteristics of sole proprietorship and it means an owner of the sole trader business is also known as manager and controller of his business.
Through proper management, he manages all things, resources (human and material resources), business activities and he also takes better decisions for managing the challenges and opportunities for the purpose of creating the better environment.
In simple words, management is such a process that we can assemble, manage, control all the business and other related things.
3. Source of Capital Funds-
Source of capital is the third characteristics of sole proprietorship and it indicates the way of acquisition of funds i.e., Where will the capital come from? The answer is, sole proprietor capital is come from his personal savings, from friends and families, and from financial institutions.
The capital volume is very limited in the sole proprietorship business because it’s business size is very small and there is no factor of continuity also.
Stability is the fourth characteristics of sole proprietorship and it means the stability and continuity of the firm is totally depend upon efficiency, capacity, and life cycle of a sole proprietor. The growth and success of the sole proprietorship business also depend upon the stability because it develops the improvement capacity of any business and also protects from the unnecessary materials.
In the sole proprietorship business, stability is also the main feature or characteristic of sole proprietor because it helps to define the majority, strength, fastness, and continuity of the business enterprise.
5. Single Man Control-
Single man control is the fifth characteristics of sole proprietorship and it means an individual owner of a sole business controls all things individually. He controls all efforts and resources related to the business solely. In this sole business, an individual takes itself from all the decisions and implement it by enhancing his business.
Liability is the sixth characteristics of sole proprietorship and it means the liability of a sole trader is always unlimited. It means that, at the time of loss, if an individual fails to pay his debts, then his personal property sold to pay the liabilities of his creditors.
If we consider, it is also said that unlimited liability is also a huge disadvantage for any sole proprietor.
7. No sharing of Profit & Loss-
No sharing is the seventh characteristics of sole proprietorship and it means whatever profits earned from the individual trader business, its totally belongs to the sole owner of the business. Similarly, if there is a loss in a sole proprietorship business, then he too will have to face it.
In this case, the sole proprietor follows the procedure of no profit or no loss. However, in the partnership business, profit sharing function is a must.
8. Provide Employment Opportunities-
Employment opportunity is the eighth characteristics of sole proprietorship and it means is to provide the facility of employment opportunities to our community and society. Through employment facilities, the sole proprietor helps to fulfill the unemployment criteria and also increases the engagement of the business (like enhancing the growth, productivity, labor facility, sales, community and so on).
This feature point is very helpful to make solo business efficient and effective.
9. Minimum Legal Aspects or Formalities-
Minimum legal formalities are the ninth characteristics of sole proprietorship and it means that in the sole proprietorship business, the legal document is necessary for the business but in a minimum way. The sole trader business is the easiest business structure because there is a very low capital invested in it and has minimum formalities also. So, that’s the reason, the legal formalities is also an important characteristic of sole proprietorship.