Sole Proprietorship

SOLE PROPRIETORSHIP

Introduction

A business organisation is an organisation which is engaged in some industrial or commercial activity. It represents an institutional arrangement for carrying on any kind of business activity. It may be owned and controlled by a single individual or by a group of individuals who have entered into a formal or informal agreement to jointly conduct the business.

Every business undertaking is a separate and distinct business unit. It has its own identity and separate ownership. It can be distinguished from other undertakings on the basis of its ownership, management and control.

According to Wheeler, “a business under- taking is a concern, company or enterprise which buys and sells, is owned by one person or a group of persons and is managed under a specific set of operating policies”.

All  business  undertakings   are   directly or indirectly engaged in the transfer or exchange of goods and services for value. They deal in goods and services on a regular basis. Their main motive is to earn profits and they are exposed to various types of risks.

Sole Trading Business

Sole Proprietorship is a form of business organisation in which an individual introduces his own capital, uses his own skill and intelligence in  the  management of its affairs and is solely responsible for the results of its operations. The individual alone may run the business or may obtain the assistance of employees. It is the first stage in the evolution of the forms of organisation and is, thus, the oldest among them.

It is also known as individual entrepreneurship. To raise the required capital the individual may depend mostly on his own savings, or else, he may borrow part or whole from his friends or relatives or financial institutions. The business may be started either in a portion of the proprietor’s own house or in a rented premises. There are no legal formalities to be gone through except those required for a particular type of business. For example, if one wants to start a restaurant has to obtain a license from the Health Department of the Municipal Corporation.