Proprietorship business- Features, advantages and disadvantages

            Proprietorship business is the simplest form of business. It can be started by a single individual. There are very few legal formalities for setting up a proprietorship business when compared to any other form of business. Profits and losses of the business is beared by the proprietor alone. Taxation for this type of business is simple since only individual tax rates are payable as income tax. There is no separate income tax for the business. There is no separate legal entity for a proprietorship business distinct from the proprietor. The proprietorship business have an unilimited liability and all the debts and liabilities are borne by the proprietor himself. Registrations such as VAT/CST/GST etc. are to be taken according to the nature of the business. A proprietorship business can be started with low investment and is ideal for small scale businesses.

Advantages of a proprietorship business

1)    Proprietor has complete control over all matters regarding the business.

2)    Sale or transfer of the business can be made by the proprietor according to his  wish.

3)    The are very few statutory obligations to start a proprietorship business. Tax rates for income tax is also very low. There no separate tax for the business other than the individual tax payable by the proprietor.

4)    Proprietor has the freedom to take any decision regarding the business without discussing with any other person. Freedom of decision can lead to innovative business ideas.

5)    The proprietorship business have the least start up costs when compared to any other form of business. 

Disadvantages of a proprietorship business:

1)    Unlimited liability of the proprietor is the main drawback of a proprietorship business. Proprietor and his assets is solely and personally held liable for the debts of the business.

  

2)    All the day to day activities of the business are to be conducted by the proprietor alone. He can appoint staff but he only is held liable for any fault occurred. It is really a heavy burden on the shoulders of the proprietor.

3)    Another drawback is regarding the raising of capital required for the business. Financial investment is solely relied on personal financial capacity of the proprietor. Personal assets of the proprietor may have to be sold or pledged for the running of the business and it has an inherent risk in it.

4)    Decision making regarding a crucial business problem can become tedious task since there is only one person to think. In other business forms such as a partnership firm or company, views of more persons can be considered before taking decision in a crucial matter which leads to better decisions.

5)    Work and personal life balance of the proprietor becomes difficult sometimes. Personal and professional obligations can encroach each other and create problems both in official and family lives. In other business forms, there are equally responsible owners upon whom you can entrust the work obligations. Heavy work pressure can also lead to different health problems. 

            In spite of all the above mentioned disadvantages, the proprietorship business is the most common form of business which majority of people select when starting a new business. It is most ideal form for small scale business ideas. 

N.B.- This article is prepared according to laws and rules prevailing in India.