Characteristics of Sole Proprietorship:
1. Ownership: Sole proprietorship is a business owned and managed by a single individual. The owner has complete control over the business and is solely responsible for all decisions and actions.
2. Liability: The owner of a sole proprietorship is personally liable for all debts and obligations of the business. This means that their personal assets can be used to satisfy business debts if necessary.
3. Taxation: The business income and expenses of a sole proprietorship are included on the owner's personal income tax return. The owner is responsible for paying income taxes on the profits generated by the business.
4. Flexibility: Sole proprietorships are relatively easy and inexpensive to set up and dissolve. There is no need for complex legal documentation or formal registration processes.
5. Profit and Loss: The owner of a sole proprietorship receives all of the profits generated by the business. Likewise, they are responsible for all losses incurred by the business.
6. Control: Sole proprietors have complete control over decision-making and management of the business. They do not need to consult or seek approval from any other parties.
7. Succession: Sole proprietorships do not have a separate legal existence from their owners. Therefore, it can be challenging to transfer ownership or pass on the business to another individual upon the owner's retirement or death.
8. Limited resources: Sole proprietorships often have limited financial and human resources compared to larger business entities. This may limit their ability to expand and compete with larger competitors.
9. Lack of specialization: Sole proprietors are responsible for all aspects of the business, from sales and marketing to operations and accounting. As a result, they may lack specialized skills or expertise in certain areas.
10. Risk: Sole proprietors bear all the financial and legal risks associated with the business. They may be vulnerable to personal financial loss in the event of business failure or legal disputes.