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28 BUSINESS  STUDIES controlled by an individual who is the the owner is personally responsible recipient of all profits and bearer of for payment of debts in case the assets all risks. This is evident from the term of the business are not sufficient to itself. The word “sole” implies “only”, meet all the debts. As such the owner’s and “proprietor” refers to “owner”. personal possessions such as his/her Hence, a sole proprietor is the one who personal car and other assets could be is the only owner of a business. sold for repaying the debt. Suppose This formofbusinessisparticularly the total outside liabilities of XYZ dry common in areas of personalised cleaner, a sole proprietorship firm, are services such as beauty parlours, hair Rs. 80,000 at the time of dissolution, saloons and small scale activities like but its assets are Rs. 60,000 only. In running a retail shop in a locality. such a situation the proprietor will Sole trader is a type of business unit where a person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of business. J.L. Hansen The individual proprietorship is the form of business organisation at the head of which stands an individual as one who is responsible, who directs its operations and who alone runs the risk of failure. L.H. Haney Features have to bring in Rs. 20,000 from her Salient characteristics of the sole personal sources even if she has to sell her personal property to repay the proprietorship form of organisation firm’s debts. are as follows: (iii)  Sole risk bearer and profit (i) Formation and closure: There recipient: The risk of failure of is no separate law that governs sole business is borne all alone by the sole proprietorship. Hardly any legal proprietor. However, if the business formalities are required to start a is successful, the proprietor enjoys sole proprietary business, though all the benefits. He receives all the in some cases one may require a business profits which become a direct license. Closure of the business can reward for his risk bearing. also be done easily. Thus, there is (iv) Control: The right to run the ease in formation as well as closure business and make all decisions lies of business. absolutely with the sole proprietor. He (ii) Liability: Sole proprietors have can carry out his plans without any unlimited liability. This implies that interference from others. Reprint 2026-27