Sole trade refers to a form of business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.

According to L.H. Haney, 

“The individual entrepreneurs in the form of business organisation on the head of which stands an individual as the one who is responsible, who directs its operations and who alone runs the risks of future.”

Characteristics of Sole Trader: 

1. Formation and closure of business – 

There is no seperate rule for a sole trader. Therefore, a sole trade business requires hardly any legal formality to set it up. Anybody wishing to stop a business can easily do it individually. 

2. Unlimited Liability – 

A sole trader has unlimited liability. And if the business faces any kind of loss and is not able to repay the loans, then he can repay them from his property too by selling his property for the same. 

3. Risk Bearer and Profit Recipient – 

The sole trader is solely responsible for bearing the risk, as well as he is the sole profit recipient. He does not share either of the two. Therefore, he enjoys full gain for his risk-bearing. 

4. Control – 

Insole trade, the proprietor is ‘all in all’ of a business which he establishes and manages. As he operates the business himself, thus he has full control over the functioning and working of the business. 

5. No Separate Entity – 

Both business and businessman are not different from each other. Business is not seperate from its trader. Therefore, the businessman is held responsible for every activity 

6. Lack of Business Continuity – 

Due to the same entity of business and its businessman, the business would discontinue on the death of the businessman, his becoming lunatic, on his becomes insolvent, etc. And the business would suffer from loss if the businessman is put behind the bars, gets sick or because of any other reason.