Relationship Between Sole Proprietorship & Entrepreneurship
Entrepreneurship is the process of owning and operating a business, assuming risk and creatively building a company that expresses your personal vision. Sole proprietorships are expressions of entrepreneurship, being businesses that are owned and operated independently by a single owner. Virtually all sole proprietors are entrepreneurs because a sole proprietor is, by definition, a business owner. However, not all entrepreneurs are sole proprietors because businesses can have a variety of organizational structures including partnerships, S corporations, limited liability companies and employee-owned cooperatives.
In a sense, a sole proprietorship is the quintessential format for entrepreneurship because it allows a business owner more autonomy than other business structures for making decisions and proactively developing solutions to problems. Because a sole proprietor can make business decisions entirely on her own, she can react quickly to opportunities and threats and she can be optimally flexible about financial and marketing choices. She bears responsibility for all of her company's financial risk, giving her a personal stake and an added incentive to succeed.
Entrepreneurship is a creative endeavor because a business owner has the freedom to think outside the box about everything from product development, to financing, to marketing. Entrepreneurs tend to be creative individuals who strike out on their own because they want to create something distinctive and valuable. A sole proprietorship is a particularly creative form of business ownership structure because its owner has complete autonomy and is unencumbered by partners and investors who may have a different vision and attempt to influence outcomes.
Although entrepreneurship is a manifestation of individuality and personal independence, entrepreneurs are nonetheless accountable to a range of individuals and organizations that are symbiotic with their businesses. This is true for sole proprietorships as well as businesses whose structures involve shared ownership. Every entrepreneur must meet his customers' needs or they will no longer buy his products and services, and every business owner must follow the laws that apply to his type of business or else risk fines or incarceration.
Entrepreneurship depends on sound financial management. Every viable business must have a sound business model that enables it to bring in revenue and earn more than it spends over the long term. This is especially true for a sole proprietorship because its owner's finances are intimately connected with those of the company. If the business loses money, then the owner loses money, and if the business loses so much money that it can no longer operate, then the owner is personally responsible for any shortfalls.