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Sole Proprietorship

A sole proprietorship is a business organization owned and managed by one individual. The owner and his or her business are not considered as separate entities. As such, the owner receives all the profits and benefits, and bears all the losses and risks of the business. He or she owns all the assets of the business and is personally responsible for all its liabilities and debts. The personal assets of the sole proprietor and those of the business are not distinguishable if legal claims are made against him or her.

Sole proprietorship is the oldest and simplest form of business ownership and the most common because of easy formation and the cost of starting the business is low. It is not subject to stringent regulations. The amount of book keeping is minimal. As the owner and the business are a single entity, he or she does not pay separate taxes for the business as all profits and losses of the business are reported on his or her income tax return.

Being the same entity, the business ceases to exist when the owner is no longer involved in the business for some reason such as retirement, death, etc. Examples of the self-employed sole proprietor are barber and contractor,

The sole proprietor may use a trade name other than his or her name.

1 What is the trading and profit and loss account?
2 Trading Account
3 Trading and Profit and Loss Account
4 Balance Sheet