expalin the features of sole proprietorship ?
Answers
Explanation:
Features of Sole Proprietorship:
(1) Formation and Closure
This type of business organization is formed by the owner himself.
No legal conventions are obliged to start the sole proprietorship form of organization.
In some instances, the legal formalities are required or the owner should have a particular license or a certificate to run the business.
The owner can close the business at his own discretion.
Example: Goldsmith or a person running a medical shop should have a license to run this type of business.
(2) Liability
In the sole proprietorship business, the sole owner has unlimited liability.
In this case, the owner is himself liable to pay all the liabilities. If he takes a loan for its business then he will be liable for all the debts.
Hence, he is personally liable for all the debt which can be recovered by his personal estate when funds are insufficient.
Example: A loan taken by the owner of the sweet shop is solely responsible for the repayment of the loan to the bank.
(3) Sole Risk Bearer and Profit Recipient
A sole proprietor is only the one who bears all risks which are related to its business.
All the profits or losses which are earned from the business are to be enjoyed by the sole owner.
(4) Control
As all the rights and responsibilities lie with the sole proprietor that is why he controls all the business activities.
No one can interfere in the business activities of a sole proprietor.
Hence, only the sole proprietor can modify his plans accordingly.
(5) No Separate Entity
According to the accounting system, the owner and the business are considered as two separate entities.
But the law does not make any distinction between the sole trader and its business.
Hence, without the sole trader, the business has no identity because he is the only person who performs all the business activities.
(6) Lack of Business Continuity
Death, imprisonment, physical ailment, insanity or bankruptcy of the sole proprietor will directly affect the business or it may cause shutting down of the business.
In the case of the beneficiary, successor or legal heir of sole proprietor, he can run the business on behalf of the proprietor.
,(θ‿θ)ʘ‿ʘ(ʘᴗʘ✿)(◕ᴗ◕✿)
hope helpful to you
