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Fusion Mobile - SOLE PROPRIETORSHIP | Nigeria’s Mobile e-Learning Platform


A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual or one legal person and in which there is no legal distinction between the owner and the business. The owner is in direct

SOLE PROPRIETORSHIP | Nigeria’s Mobile e-Learning Platform A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual or one legal person and in which there is no legal distinction between the owner and the business. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss etc.

The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's. It is a "sole" proprietorship in contrast with partnerships (which have at least 2 owners).

A sole proprietor may use a trade name or business name other than his, her or its legal name. They will have to legally trademark their business name, the process being different depending upon country of residence.

The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. The owner of a sole proprietorship typically signs contracts in his or her own name, because the sole proprietorship has no separate identity under the law. The sole proprietor owner will typically have customers write checks in the owner's name, even if the business uses a fictitious name.



FEATURES OF SOLE PROPRIETORSHIP

The business enterprise is owned by one person
The main objective of the business is to make profit
The capital required to run the business is provided by the proprietor
The sole proprietor has unlimited liability
It is not a legal entity as the owner is not separated from the business
The business is controlled and managed by the owner
The enterprise can fold at any time; depending on when the owner becomes uninterested in running the business.

SOURCES OF CAPITAL FOR A SOLE PROPRIETOR

personal savings
loan from family and friends
purchase of goods on credit
loan and overdrafts from banks
grants/loans from government



Advantages:

Easy and inexpensive to form a sole proprietorship (you will only need to register your business name provincially, except in Newfoundland and Labrador)
Relatively low cost to start your business
Lowest amount of regulatory and operational burden
Direct control of decision making
Minimal working capital required to start-up
Tax advantages if your business is not doing well, for example, deducting your losses from your personal income, lower tax bracket when profits are low, and so on
All profits will go to you directly
Owners can establish a sole proprietorship instantly, easily and inexpensively.
Owners may freely mix business or personal assets.
There is a close relationship between owner and customers
There is effective planning



Disadvantages:

Owner bears all risks alone
Owners are subject to unlimited personal liability for the debts, losses and liabilities of the business.
Owners cannot raise capital by selling an interest in the business.
Sole proprietorships rarely survive the death or incapacity of their owners and so do not retain value.
Income would be taxable at your personal rate and, if your business is profitable, this may put you in a higher tax bracket
Lack of continuity for your business, if you need to be absent
Difficulty raising capital on your own
It is not a separate legal entity
Owner lacks specialization
There is limitation in expansion