A sole proprietorship is the simplest business form with little government regulation and total flexibility in management and control. It is not a legal entity and the person owning the business is accountable for the costs, expenses and debts incurred. Sole proprietorships are common in unorganized sectors in India for their simplicity, ease of set up and nominal costs. A sole proprietorship can be operated under the name of the owner or a fictitious name. As it is not a legal entity like partnership or government regulation, no legal formalities other than appropriate licensing are required to set up a sole proprietorship.
A sole proprietorship is indistinguishable from its owner and hence the income earned is the income earned by the proprietor. The organizational expenses and level of formality in a sole proprietorship are limited when compared to other business organizations. However, it lacks business continuity and does not have a perpetual existence as it is not a legal entity.
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