The word ‘Sole’ which means single and the word
‘Proprietorship’ which means ownership. The legal
business activities which is owned and control by an
individual is called sole proprietorship.
“The sole proprietorship is the form of business
ownership which is owned and controlled by a single
individual”.-B. O. wheeler
“A sole proprietorship is a business owned by one
person and operated for his profit”. –Gloss and
“Sole proprietorship is a type of business unit where one
person is solely responsible for providing the capital, for
bearing the risk of the enterprise and for the management
of the business”.- J.L. Hanson
From the above definition we can say that the sole
proprietorship is the legal business activities where an
individual owned and control all the business activities.
Single ownership: Only one will be the owner of the
business. No other person will not be involved as an
Easy of formation: The formation of sole enterprises is
very easy. There are few documents, sometimes no
documents to be needed for forming single enterprise.
Direct relation: Owner always involve with the
activities of single ownership business. That is why
owner has direct relation with business.
Investment of low capital: Only owner can invest
capital from his or borrowed.
Self management: Each and every task will be
conducted by the owner.
Personal risk: The personal property owner will be
liable for sole proprietorship.
Profit and loss: Full amount of profit or loss will be
entitled by the owner.
Government regulation: Government has little or
sometimes no rules and regulations about
activities of the sole proprietorship.
No separate entity: Owner is not separate from the business
activities. Owner and director of the business are the
Uncertain stability: The stability of the sole proprietorship
is not certain. Because any time the business may be
winding up for the reasons of loss, death of owner etc.
Easy of formation
Proper decision making
Independence of the owner
Personal relation with the customer
Flexibility in operation
No separate entity
Unsuitability for large scale business
Lack of stability
Lack of employment opportunity
Lack of expert management
Limited scope of expunction
Business of minimum capital
Product of limited demand
Professional and service oriented
Product of changing demand
Small and cottage industry
Business of limited risk
Mobile and temporary business
Providing greater services
Assistance in large scale production
Increase of savings and investment
Increase of income and wealth
Preserving individuality Proper training and
Creation of market of goods and services
Proper distribution of goods and services
Raising standard of living
Recession: A recession also sometimes referred to as a
channel is a period of reduced economic activity in
which levels of buying, selling, production, and
employment typically diminish. This is the most
unwelcome stage of the business cycle for business
owners and consumers alike. A particularly severe
recession is known as a depression.
Decline : Also referred to as a contraction or downturn, a
decline basically marks the end of the period of growth
in the business cycle. Declines are characterized by
decreased levels of consumer purchases (especially of
durable goods) and, subsequently, reduced production
Recovery : The recovery stage of the business cycle is
the point at which the economy “channels" out and
starts working its way up to better financial footing.
Growth Economic growth is in essence period of
Hallmarks of this part of the business cycle include
increased consumer confidence, which translates
into higher levels of business activity. Because the
economy tends to operate at or near full capacity
during periods of prosperity, growth periods are
also generally accompanied by inflationary
Volatility of investment spending: Variations in investment
spending is one of the important factors in business cycles.
Investment spending is considered the most volatile component of
the aggregate or total demand (it varies much more from year to
year than the largest component of the aggregate demand, the
consumption spending), and empirical studies by economists have
revealed that the volatility of the investment component is an
important factor in explaining business cycles in the United States.
Technological innovations : Technological innovations can have an
acute impact on business cycles . Indeed, technological
breakthroughs in communication, transportation, manufacturing,
and other operational areas can have a ripple effect throughout an
industry or an economy.
Variations in inventories : Variations in inventories
expansion and contraction in the level of inventories of
goods kept by businesses also contribute to business
cycles. Inventories are the stocks of goods firms keep
on hand meeting demand for their products.
Fluctuations in government spending : Variations in
government spending are yet another source of business
fluctuations. This may appear to be an unlikely source,
as the government is widely considered to be a
stabilizing force in the economy rather than a source of
economic fluctuations or instability.
Flexibility : According to Gallagher, "part of growth
management is a flexible business plan that allows for
development times that span the entire cycle and
includes alternative recession-resistant funding
Long-Term Planning : Consultants encourage small
businesses to adopt a moderate stance in their long-
Study : "Timing any action for an upturn is tricky, and
the consequences of being early or late are serious,"
said Daltas .
Attention to Customers : This can be an especially important
factor for businesses seeking to emerge from an economic
downturn. "Staying close to the customers is a tough discipline
to maintain in good times, but it is especially crucial coming
out of bad times," stated Arthur Daltas in Industry Week. "Your
customer is the best test of when your own upturn will arrive.
Customers, especially industrial and commercial ones, can give
you early indications of their interest in placing large orders in
Objectivity : Small business owners need to maintain a high level
of objectivity when riding business cycles. business, especially
in economic of the facts can devastate a Operational decisions
based on hopes and desires rather than a sober examination