Sole Proprietorship Characteristics
- Per the Registration of Business Name Act, 1962, (Act 151); Where the name of the business is not a natural name, it must be registered;
- A registered business name must be renewed annually.
- A Sole Proprietorship needs a Business Operating Permit (BOP) from the appropriate local authority.
- Easy to Setup
- Better Control
- Flexibility in Operations
- Prompt Decisions
- No Profit Sharing
- No Corporate Tax
- Ease of Ending Business
- Unlimited Liability: The liability of business covers the personal assets of the owner.
- Limited Financial Resources: The ability to raise capital or take a loan is always limited.
- The inadequacy of finance is a major setback for growth.
- Limited Capacity of Individual: The capacity of the sole owner to manage the business is limited.
- Uncertainty of duration: The existence of a sole proprietorship business is linked to the life of the proprietor. Ill health, death or insolvency of the owner brings an end to the business.
Suitability of Sole Proprietorship
- It is suitable where the market is limited, localized and customers give importance to personal attention.
- The nature of business is simple and requires quick decisions on the go
- For businesses where the capital required is small and risk involvement is not heavy,
- Ideal for small scale start ups