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Wednesday, 9 March 2011

Define Sole tradership or Sole Proprietorship and Dicuss Advantages of Sole Proprietorship

Definition:-
Sole trader ship Sole Proprietorship is the oldest form of business organization which is owned and managed by an individual for the sake of earning profit. In other words of D . W . T . STAFFORD. "It is a simplest form of business which is owned and controlled by one man."

According to GLOS & BAKER " A sole trader ship is a business owned by one person and operated for his profit." This organization may easily be formed and is not required by law to be registered.One person invests his capital and devotes full time and energy into his business activities and so he enjoys hundred percent profit of his business.One the other hand, if there is loss he lonely sustains all the losses. He is close to both clients and employees.As sole proprietor has unlimited liabilities, his private assets are also liable to settle the claims of the creditors. The chief types of concerns are retailers, hawkers and persons engaged in rendering direct services for the public near their homes.

Advantages of Sole tradership or or Sole Proprietorship

1. Easy Formation
An individual enterprise is easy to form and simple to run. No legal formalities, like registration are required to set it up, and no reports are submitted to the govt, about the function of business.But there is a complicated and long process for the formation Joint of Stock Company.

2. Personal Interest
As there personal elements in this form of business organization, businessman devotes his full time and energy to his business. He tries to know the habits, fashions and tastes of his customers and he changes his policy according to circumstances. Thus he may easily establish his good will in the market due personal care. But partners and shareholders have minor personal interest in respective business.

3. Entire Profit
There is no other form of business in this world except this where one man enjoys 100% profit of the business.But in the partnership and joint stock company, the profit is distributed among the number of persons.

4. Secrecy
Secrecy is the important factor which may be maintained by the sole proprietor. There are three types of secrecy i.e. trade agreement, technique of production and profit.These give him advantageous position form there form of business organization.

5. Low Cost of Starting and Operation
Sole Proprietor has to incur minor preliminary expenses for the commencement of this type of business. There are no legal charges, registration expenses, attorney and advisory fee. As generally the business is managed by one person, he has not to pay operational expenses. But joint stock company is costly organization.

6. Entire Control
Sole trader has entire control over all his assets and other business activities. When his business increases in size, some authority is delegated to paid person, but ultimately the control and supervision remain in the hands of one person.He can do whatever he likes.Other person cannot interfere in his mater. But this not possible in other form of business organization.

7. Easy Dissolution
This type of business may easily be dissolved at any time. There is no complicated formality for the dissolution of sole proprietorship business as in the case of joint stock company where long legal procedure are required for the winding up of its business.

8. Social Benefits
This form of business may be commenced with small capital and minor managerial abilities. So it provides the opportunity for livelihood to jobless persons. On the other hand, sole trader renders valuable services for the public.
He provides daily necessities of life near to their home. He also decreases the concentration of wealth and powers into few hands.

9. Credit Facilities
Under the sole trader ship the liability of the owner is unlimited. It means that his private assets are also liable to pay the business obligations. This factor enhances the business credit facilities from the internal and external sources.

10. Flexibility
As the business is controlled by one person, he can change business policy at any time according to change circumstances.He can introduce new technique of production. new formula and new style of product without the consent of other partners, which may be causes for delay and default.

11. Economy
As mostly the activities are supervised and controlled by the sole proprietor himself, therefore, it tries to achieve the economy in various fields of business. Thus his sources do not waste in un-productive sector.

12. Direct Relationship
Sole trader possesses social connected life and this is the important factor for the expansion of business. On one side he maintains direct relationship with the workers to achieve best results of his venture. On the other side he develops cordial relations with customers and general public in order to create the demand of his product. He thus establishes his sound reputation inside and outside the business.

13. Simplicity in Transferability
The kind of business may easily be transferred to another person. No legal permission is required to close down or suspend his business At any time sole trader may recommence, transfer or disconnect his business without any restriction.But there is long complicated procedure to transfer the business of joint stock company.

14. Independent Sources of Livelihood
Sole proprietorship is an independent form of organization for businessman in the world. There is no interference from any quarter. He is the supreme authority of his business who enjoys self determination, excitement of social relation and psychological satisfaction.

Due to the the above mentioned reasons and befits, he system of single ownership is liked and proffered to other forms of business houses and therefore, this type of business is found till today in spite of begin an old system.

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