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Explain 'proprietorship theory' and its origin

Explain 'proprietorship theory' and its origin

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Proprietorship theory states that assets and liabilities are solely owned by proprietor. It applies to single proprietorship entities where a personal relationship is established in management and owner. Often, they are same person. It is also applicable to partnerships where in each period net income transferred to partners' capital.

It originates easily as does not requires incorporation because the owner makes all decisions. Owner has all rights to the profits and are accountable for liabilities and losses of the business. It can be started under a fictitious name. Sole proprietorship is not taxed seperately and there is no requirement of insurance too.

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