Sole proprietorship:

• A form of business in which the business firm is owned, managed and controlled by only one person is called a sole proprietorship and the person is called proprietor or sole proprietor.
• From the above definition one can conclude that a lone trader or a sole proprietor is only and wholly responsible for the entire business and that the entire business is carried out under his direction. He alone enjoys the profit and is responsible for loss in business or insolvency.

Characteristics of proprietorship:
1. Easy to establish:
One can easily set-up a proprietorship business firm without any legal hassles. A proprietor can start his firm from any place he seems proper.

2. Capital:
The proprietor raises his own capital. He can borrow money if he wish but it becomes his sole responsibility to return it.

3. Power of administration:

• The sole proprietor himself looks after the administration. He himself sees purchase, sales, collection, accounting and other business activities.
• However, he may take help from family members, relatives or even hire someone.

4. Freedom of work and quick decisions:
The proprietor enjoys complete freedom as how he wants to run his business. He runs his business based on his intelligence and experience. Since he has all the freedom and no one to interfere he can make quick decisions.

5. Unlimited liability:
The proprietor has unlimited liability. This means that if he is unable to repay his debts, the creditors can claim even for his personal properties and assets in the court of law to recover their money.
In other words if the business incurs loss and the proprietor is unable to pay his debts then he may have to mortgage or even sell his personal assets to repay.

6. Maintenance of secrets:
The proprietor manages everything himself and so his trade secrets do not get leaked.

7. Personal contact:
The reach of a sole proprietorship is generally not very far. Hence, the proprietor is able to maintain personal contact with customer’s vendors, etc. This helps him to understand customers, employees, creditors, etc. better, serve them as per their taste, fashion and demand, etc. and keep them satisfied.

8. Centralization of ownership and management:
In sole proprietorship the proprietor is the owner as well as manager. Hence, unlike other business forms there remains unity or say centralization between ownership i.e. owner and management i.e. manager of the business.