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Definition, Types, and Examples of Sole Proprietorship
Who is a Sole Proprietorship Business: In the business world, a sole proprietorship is known as a form of business entity. From its definition, a sole proprietorship is a form of business that is owned, operated, and borne by only one person.
Are you planning to start and build your own business? If so, the type of sole proprietorship is the right form of business to run for micro and small-scale businesses.
This form of business seems very suitable for those of you who want to start a business from scratch with not too large a capital. This business model is also more flexible in terms of product, time, and place.
What is Sole Proprietorship?
The definition of a sole proprietorship is a type of business entity that is owned by one person. The owner of this type of business does not only take his profit but is also fully responsible if he experiences a loss.
This sole proprietorship has a management information system that is free and there is no direct intervention or interference from other parties, for example, the government.
Sole proprietorships are usually operated with relatively simple means of production and technology. In addition, the capital required in the production process is quite small so the number of products produced is small. The number of workers needed is not much.
Even so, this type of individual business can also generate a lot of income if the business owner can run and manage his business well.
Because the company is managed and supervised by only one person, the owner or manager of the business will get all the profits of the company without the need to share it with others.
However, the drawback is that the owner of a sole proprietorship has to bear all the risks that will arise in his business activities.
Characteristics of Sole Proprietorship
A company is said to be a sole proprietorship if it has certain characteristics or characteristics. The characteristics of a sole proprietorship include:
- The formation process is quite easy;
- The owner of the company is an individual;
- Capital is not too large and involves personal assets;
- The system or how to manage it is quite simple;
- His duties and responsibilities are not limited;
- Business continuity depends on the owner;
- The added value or sales value is relatively small;
- Sole proprietorships can be transferred at any time.
Type of Sole Proprietorship
Licensed Sole Proprietorship
A licensed sole proprietorship is a type of sole proprietorship that has permission from the authorities to operate.
Companies that are already licensed usually have a Business Registration Certificate, or Trading Business License. business place permit, Taxpayer Identification Number, and so on.
Unlicensed Sole Proprietorship
An unlicensed sole proprietorship is a type of individual company that does not or has not had a permit from the authorities.
For example roadside kiosks, street vendors, and so on.
Example of Sole Proprietorship
Agricultural Business
Sole proprietorships in the agricultural sector are usually located in rural areas. This business has limited capital because farmers usually cultivate their agricultural land and the produce from agriculture will be resold to return the capital.
For a business process like this to run smoothly, you need to master the science of management and economics that can be used as analysis.
To do so is not too difficult and does not require special skills. You can even use limited land to produce vegetables. You can also make this farming business a side job for additional income.
Examples of sole proprietorships in agriculture include the following:
- Ornamental plant cultivation
- Hydroponic plant business
- Buying and Selling Plant Seeds
- Plant Fertilizer Production
- Spice Plant Business
- Selling Organic Vegetables and Fruits
Small industry
This type of small industrial business can be done individually because it can be started from a small capital. In addition to their capital which is not too large, small industrial businesses also usually have a small workforce, around 5 to 19 people. The workers are usually taken from the owner’s closest environment such as friends, friends, or his out.
Small industrial businesses can also offer services that are sourced from the expertise of the owner. This causes this small industry to move more flexibly. For example, an artist who offers painting services by making painting bags, crafts, recycling used goods, and so on.
Examples of sole proprietorships that you can turn into business ideas include:
- Clay Craft
- Woodcraft
- Domestic industry
- webbing
- Toy
- Wedding Souvenirs
Trading Business
Trading businesses are probably the most common type of sole proprietorship that you encounter in your daily life. This type of business is an activity of buying and selling goods to make a profit.
This type of business can be done individually if you want to start a business with small capital. This type of sole proprietorship can also be done by anyone without special skills.
Examples of sole proprietorships in the trading business:
- Retailer
- Agent Sales
- Dropshipping or Reseller
Also read: What is Work Motivation: Definition, Indicators, and Examples
Service Business
Naturally, there is an assumption that the trading business is one of the types of business that is most in demand by the Indonesian people. Although this business requires special skills, it can be adapted to talent and even fun.
Because of that, this type of business is widely eyed because it is more flexible and can adapt to abilities and of course, it can be managed individually. This business can even be done without capital.
The opportunity for this type of individual business is very wide open because it can be done from any category. This type of service business has lucrative profit potential. Service businesses that are carried out online have greater potential because they can penetrate a wider market.
Examples of individual companies in the field of service procurement include the following:
- Graphic design
- Youtuber
- Freelance Writer
Advantages and Disadvantages of Sole Proprietorship
The following are the advantages and disadvantages of sole proprietorships.
Disadvantages of Sole Proprietorship
- The owner of a sole proprietorship has unlimited liability
- Capital sources are quite limited
- Management or management can be disrupted
- Business continuity is not guaranteed with certainty
Advantages of Sole Proprietorship
- A sole proprietorship is a type of business that is not subject to corporate tax, such as a PT or firm
- Internal management is not so complicated and the owner can easily carry out monitoring.
- Management and operational costs tend to be low because the business owner has duties as an employee of the business itself.
- Does not require complicated legal administrative processes, such as going to a legal notary, etc.
From all the explanations regarding the sole proprietorship, the conclusion is that a sole proprietorship is a company owned by one person. Even so, sole proprietorships can still be developed to be bigger. Of course, developing a sole proprietorship requires large capital.
If you are an owner of a sole proprietorship and need additional capital to develop your business. Do Research on Sole Proprietorship.
