Many individuals start their businesses by forming a sole proprietorship firm. This is because it may be difficult for an individual to find a partner/director (required to form a partnership/limited company). Another reason can be lack of trust on any other person who may be interested in becoming a partner/director in the firm.

In case of a sole proprietorship firm, business owner is responsible for taking day to day business decisions and all the risks and challenges associated with business operations have to be faced by the owner himself/herself.

Business owner has to arrange for the amount of initial capital and money required to finance day to day business activities. Sole proprietor is entitled to receive all the profits made by the business at the end of the year.

Similarly, a sole proprietor has to bear all the losses resulting from ineffective decision making, lack of sales, high cost of procurement, employee fraud and so on.

Examples of Sole Proprietorship Firm

Business Consultant

An individual having a professional qualification and years of experience in a particular domain (such as finance, information technology, marketing and so on) may start a sole proprietorship firm for providing consultancy services. While this individual may hire other professionally qualified employees,he/she will continue to remain the owner of the business.

For Instance, an MBA may start a management consulting firm for providing consultancy services in investment banking. This individual may hire various research associates in order to perform research for company’s clients.

Irrespective of the size of company’s operations, individual’s form of business will be considered as sole proprietorship only. Consultants generally charge professional fees for services provided by them.

Real Estate Broker

One of the main parties involved in the process of a real estate transaction is the broker who acts as an intermediary/agent for the seller/lessor or the buyer/lessee. This business is mostly self owned with only two to three employees who handle customer queries and arrange customer visits to various properties.

These brokers earn their income in the form of commission charged by them from the customer on each transaction. For Instance, an individual may have taken a property on a monthly rent of $ 1, 000 through a real estate broker. This broker may have charged one month rent ($ 1,000) as commission from the individual.

Also Read

Four Important Challenges Of A Sole Proprietorship Business
Differences Between Sole Proprietorship And Partnership Firm
Five Main Characterstics Of Sole Proprietorship
Necessary Requirements For Starting Sole Proprietorship Business

Retail Outlet Owner

Many retail outlets (such as grocery stores, food and bakery outlets and so on) are generally owned by a single person. Depending on the size of the outlet, it is quite possible that the owner may not be physically present in the store for monitoring day to day business activities.

Owner may hire a cashier and two to three sales executives to sell products and collect money from the customers. At the end of the day, cash reconciliation may be performed by the owner to ensure that the total amount of money collected is equal to the amount of sales made during the day.

Even when the owner is not directly involved in the selling process, he/she continues to bear the losses that may arise on account of customer theft or employee fraud.