Rajat was studying in class X. He had to drop out from school as his family could not afford it. He had to take a job of a peon in an office to provide money for his family. He lost his job at the office as the bank interest rate had gone up and the office was finding it difficult to meet expenses. On his way home he stoped at a snack stall to eat something. There he got the idea of opening his own snack stall. Rajat went to meet Mr Om, who was known to his father and used to give finance to people in need. Mr. Om agreed to give finance to Rajat. Rajat took 2 lakhs from Mr. Om and purchased a stall for ₹80,000 and some utensils and gas for ₹20,000. He purchased vegetables, bread, oil, spices etc for ₹10,000, cups, plats and disposable items for ₹5,000. He decided to make sandwiches and sell them for ₹50 each as the competition was high and he wanted customers to come to his stall. He named his food stall "Paras food stall."

In the disposable item, Paras also purchased some boxes so that customers who wanted to take the food home can be given in the boxes. This increased his cost by ₹6,000. By the end of the year, the demand of the sandwiches made by Rajat increased and earned a profit of ₹80,000 after paying taxes.

Due to the popularity of the sandwiches of Rajat, his two friends approached him and asked Rajat if he could help them. Rajat told them that he will manufacture the sandwiches and they would be given the right to distribute them in different parts of the city. The cost of production reduced as Rajat now had to produce in bulk. Rajat's friends are also very happy as all the sandwiches got sold and everyone knew about the sandwiches made by Rajat.

Identify the form of business organisation formed by Rajat.

Sole proprietorship

The correct answer is option (3) - Sole proprietorship

Rajat's business, as described, is most likely a "Sole Proprietorship." In a sole proprietorship, a single individual owns and operates the business. Rajat personally took the initiative, obtained finance from Mr. Om, made decisions about purchasing equipment and supplies, and managed the entire operation of his snack stall. The fact that he named the food stall "Paras food stall" and made independent decisions about the business suggests a sole proprietorship, where there is a single owner responsible for the business's success and challenges.

Characteristics of sole proprietorship: As 'sole' means single and 'proprietor' means owner, this type of business is one person show exhibiting following features:

1) Individual ownership: This business is exclusively owned by a single person.

2) Individual management and control: "What is to be done, how it is to be done, and when it is to be done‖ - all affairs are managed and controlled by the sole proprietor. Though, competent people can also be employed for efficient management.

3) Individual financing: All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business.

4) No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with owner's death, business too dies.

5) Unlimited liability: The proprietor is liable/responsible for all losses arising from business. In case the business assets are insufficient to pay off liabilities, his/her personal property can be called upon to pay his business debts.

6) Sole beneficiary: The sole proprietor alone is entitled to all the profits and losses of business. So he/she puts his/her heart and soul to increase his/her profits.

7) Easy formation and closure: Sole proprietorship is subjected to minimum legal formalities and regulations both at the time of commencing and/or closing.

8) Limited area of operation: This form of business generally has a limited area of operation due to: limited finance availability and limited managerial abilities