Sole Trader or Sole Proprietorship — Flashcards

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A sole trader or sole proprietorship is a business owned, managed and controlled by a single individual. The same person provides the capital, takes decisions, bears the risks, and receives the profit…

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It is called the simplest form of business organisation because one person controls everything, legal formalities are minimal, and business can be started or closed easily.

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Individual proprietorship means the business is under the control of one person who is responsible for all business affairs. Capital and employees may be arranged if needed, but the final responsibili…

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Sole management means one person acts as the only manager of the business. Even if helpers are appointed, the sole trader remains responsible for the working of the business.

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Unlimited liability means the sole trader is personally responsible for business debts. If business assets are not enough, private property can also be used to pay the debts.

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In sole proprietorship, there is no legal difference between the business and the businessman. The owner and the business are treated as one for legal purposes.

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Freedom in selection of trade means the sole trader can choose the business of his choice without consulting others. The owner can also change the business later if circumstances change.

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Secrecy means business decisions and plans are kept confidential by the owner. It is useful because it helps prevent competitors from entering the same trade and protects business ideas.