SOLE PROPRIETORSHIP BUSINESS





By: SENATHON IPIA





Definition of Sole Proprietorship
A Sole Proprietorship is a business owned by one person and is NOT a separate legal entity from its owner.

Another name for sole proprietorship is private enterprise.

The owner of the business is referred to as sole proprietor or sole trader.


Features/Characteristics of Sole Proprietorship
1. Sole ownership: One person owns the business.
2. Not a separate legal entity from its owner: In the eye of the law, the sole proprietor is the business; the business is the sole proprietor.
3. Unlimited personal liability: A sole proprietor has unlimited liability for the debts of the business. This means the personal property of the owner would be added to settle the business debts if the business assets are not adequate to settle the business debts.
4. Motive (reason) for the formation: To make profits
5. Sources of capital or finance: These are personal savings, gifts or borrowings, loans and ploughed-back profits.

Advantages of Sole Proprietorship
1. Requires small capital to start and run the business.
2. Easy to establish and run because little amount is required as capital and the registration of the business is simple.
3. All the profit made belongs to the owner.
4. Fast or quick decision making, since there is only one decision maker for the business.
5. It can suit any environment, even rural areas where companies may not exist.

Disadvantages of Sole Proprietorship
1. The owner bears all the business risk alone. In other forms of business, risk is shared.
2. Unlimited liability: Personal property of the owners may be added or used to settle business debts.
3. Lack of continuity after death or retirement of the owner.
4. Inability to expand the business due to limited capital.
5. Limited scope of decision and policy making, since it is just one person.

Sources of Capital or Finance of Sole Proprietorship
The money used to start and run sole proprietorship comes from:
(i) personal savings
(ii) gifts or borrowings from family and friends
(iii) loans from banks or co-operative societies
(iv) Ploughed-back profits.


Registration of Sole Proprietorship Business
In Nigeria, the government established authority that registers businesses is known as Corporate Affairs Commission (CAC).
Registration of a sole proprietorship business by the CAC is known as registration of business name. After registering a sole proprietorship business with the CAC, the CAC would issue Certificate of Registration of Business Name to the business owner – the sole proprietor.

Note: 1. A business name would have its name ending with the word “enterprises”.  An example of a business name is: Senaipia Enterprises.

2.  It is possible that some sole proprietors that you know are yet to register their businesses with the CAC.



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