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Sole Proprietorship

A sole proprietorship is a business

established, owned, and controlled by a
single person.
Sole proprietorships come in all shapes and
The owner realizes all the profits and
assumes responsibility for all losses.
The sole proprietorship is the most
prominent of the four forms of ownership.

Chapter 4

Slide 1

Formation of a
Sole Proprietorship
Of the four forms of ownership, the sole
proprietorship is by far the easiest to form.
The government exercises very little control
over the establishment of new sole
Start-up can be immediate and simple.
You may need to obtain licenses or permits
for your particular type of business.

Chapter 4

Slide 2

Operation of a
Sole Proprietorship
Sole proprietors make all the
decisions regarding the operation of
the business.
The assets of sole proprietors are not
considered legally separate from the
assets of the business.
Owners of sole proprietorships report
business income and expenses on
their personal income tax returns.

Chapter 4

Slide 3

Advantages of a
Sole Proprietorship

Sole proprietorships are simple to start. No

formal action is required.
A sole proprietorship may be started
The owner has total control of all aspects of
the business.
The owner receives all the profits.
The business itself pays no income tax; the
owner pays income tax as an individual.

Chapter 4

Slide 4

Disadvantages of a
Sole Proprietorship
The owner has unlimited responsibility
for losses, debts, and other liabilities
the business might develop.
The owner must make all the
The owner is the only person who can
arrange financing or capitalization.
The existence of the business ends
upon the owners death.

Chapter 4

Slide 5

Mental ability: intelligent person.
Organising ability: good
Hard work: ready to work for long
Discipline: highly disciplinedeverything to be in order for them.
Clear objectives: regarding nature of
business & products to be produced.

Need for high achievement- they have

a strong desire for achieving something
Optimistic: highly optimistic- not
disturbed by present problems-hope
favourable future.
Risk taking: they like challenges.
H.R. ability: maintain good relations with
other people (employee, vendors,
customers, bankers).
Emotional stability: have considerable
amount of self-control- business
pressure can be handled.

Communication ability: good

Self-confidence: tackle problems
immediately with self-confidence.
Adaptability: highly flexible- adapt
themselves for any conditions.
Positive attitude: always think
positively, they do not leave hopes even
under difficult conditions.
They are also good managers, proactive, realistic, have comprehensive
awareness & conceptual ability.

Market research
Idea generation
Product/ service analysis
Form of business: individual,
Determination of business
objectives: main objectives,
subsidiaries objectives, short term,
long term.

Promotional formality: getting license,

clearance of govt. Formalities.
Raising Capital: Own capital/Issue of
share/Borrowing loan.
Providing Infrastructure: Buying plant,
Machinery, Land.
Selection of human resources: right
people at right place.
Carrying out the Operations: where to
purchase, scale of production, fixing
price, and advertisement mean etc.

Risk Bearing
Organisation of the Resources:
combining various factors of
Exploration of new opportunities
Providing Leadership& Motivating
the people