sole proprietorship is not best in world??
Answers
Explanation:
Sole Proprietorship
Sole Proprietorship in simple words is a one-man business organisation. Furthermore, a sole proprietor is a natural person(not a legal person/entity) who fully owns and manages this type of entity. In fact, the business and the man are the same, it does not have a separate legal entity.
In addition, a sole proprietorship usually does not have to be incorporated or registered. Thus, it is the simplest form of business structure and the ideal choice to run a small business or medium scale business. Let us look at some important features of a proprietorship.
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Features of Sole Proprietorship
1] Lack of Legal Formalities
A sole proprietorship does not have a separate law to govern it. And so there are not many special rules and regulations to follow. Furthermore, it does not require incorporation or registration of any kind. In fact, in most cases, we need only the license to carry out the desired business.
And just like in its formation, there is hardly any legal process involved in its closure. All in all, it allows for ease of doing business with minimum hassles.
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2] Liability
Since there is no separation between the owner and the business, the personal liability of the owner is also unlimited. So if the business is unable to meet its own debts or liabilities, it will fall upon the proprietor to pay them. For instance, he may have to sell all of his personal assets (like his car, house, other properties etc) to meet the debts or liabilities of the business.
3] Risk and Profit
The business owner is the only risk bearer in a sole proprietorship. Since he is the only one financially invested in the company. As a result, he must also bear all the risk. In other words, if the business fails or suffers losses he will be the one affected.
However, he also enjoys all the profits from the business. He does not have to share his profits with any other stakeholders since there are none. So he must bear the full risk in exchange for enjoying full profits.
4] No Separate Identity
In legal terms, the business and the owner are one and the same. No separate legal identity will be bestowed upon the sole proprietorship. So the owner will be responsible for all the activities and transactions of the business.
5] Continuity
As seen above the business and the owner has one identity. So a sole proprietorship is entirely dependent on its owner. The death, retirement, bankruptcy. insanity, imprisonment etc will have an effect on the sole proprietorship. In such situations, the proprietorship will cease to exist and the business