Sole proprietorship

Sole Proprietorship is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, losses, etc.

Characteristics

A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. A sole proprietor may use a trade name or business name other than their or her name.

Advantages

Sole proprietorships have several advantages over other business entities. They are easy to establish, and the owners enjoy sole control of the business profits. Furthermore, the business is easy to dissolve, if desired.

Disadvantages

Sole proprietorships also have several disadvantages. The owner has unlimited liability for all losses and debts. Every asset of the business is owned by the proprietor, so, for example, a creditor of the business may lay claim to the proprietor's personal assets, such as his or her car or house. The proprietor, as such, may be at risk of losing personal assets if the business is unsuccessful.

See also

• Partnership
• Corporation
• Cooperative