Sole Trading Concern

SOLE TRADING CONCERN

The business which is started, invested and managed by a single person is called sole trading concern. It is a one man business. This form of business is one of the oldest form of business organization. The person who starts run sole trading is called sole trader or sole proprietor.

According to Petersen and Plowman, "a sole proprietorship is a business unit whose ownerships and management are vested in one person. This individual assumes all risk and failure of enterprises and receives profit from its successful operation."

In conclusion, a sole trading concern is the enterprises which are invested and managed by a single person. In this business, sole-proprietor take all risk and responsibility of business. The profit of a business is also enjoyed by a single person.

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business.

ADVANTAGES OF SOLE TRADING CONCERN

• Easy to commence and dissolve:

A sole trading concern is owned, managed, controlled and invested by a single person. So, it can be easily established and close it down whenever he/she wishes. There are limited and simple legal formalities to start and close the business.

• Quick Decision:

A sole trader can take business decisions by himself immediately according to his experiences and efficiency. He does not have to consult anybody to take decisions so that decision is quick and timely in sole trading concern.

• Secrecy:

Secrecy of business matter is key to achieve the goals.A sole proprietor is all-in-all of his business and he is also not required to publish any financial statements, he can tightly maintain business secrecy.

• Flexibility:

The sole trading concern is flexible. The owner has a greater degree of flexibility to run his business in sole trading concern. So, he can invest more capital and withdraw money or goods as per his necessity. Flexibility helps him to take benefits of the favorable situation.

• Personal supervision and control:

The sole traders act as both owner and manager, he can easily maintain and develop personal and business relations with all concerned parties like customers, suppliers, employees etc which helps in the goodwill of the concern.

• Direct Motivation:

The efforts of sole trader and his reward have the direct relationship between in the sole trading concern. The sole trader enjoys the total profits of the business alone. It direct motivates him for a hardworking and efficient management of a business.

• Easy to get loan:

The sole trading concern is a one man business organization. It is easy to start and close. A sole trader has personal relations with a large number of people. He can easily convince other people to provide loan him.

• Economy:

The owner being both manager and employees can save some office and administrator expenses and attains economy operations of a business. Family members can be also used for the personal job in sole trading concern.

• Social benefits:

Sole trading concern has a number of social benefits. It gives employment to other people of the society. The sole trader earns a better status in the society. He can involve himself in social service, provide employment, give donations and proper sponsors social functions. Hence, it provides benefits to the society.

DISADVANTAGES OF SOLE TRADING

• Limited liability

Its capital is limited due to the investment of a single owner. Such limited capital is insufficient for large-scale production and marketing of goods and services.

• Limited managerial ability

It is managed by a single owner who may not have adequate managerial skills and technical abilities. So, it may face various managerial deficiencies.

• Unlimited liability

The sole trader does not have limited liability to his business capital. The owner must pay the liability of his business even by selling his private properties if the assets of the business are not sufficient to meet such liabilities.

• Loss in absence

It may come to close if the proprietor remains absent from his business due to his illness or other reasons. So, if the owner or proprietor is absent, the business may face the loss.

• Uncertain life

Its life is closely connected with the life of the owner. So, it can be terminated any time due to death, lunacy, insolvency or disability of the owner.

• Limited scope of expansion

It has the limited scope for expansion and development. Due to the limited amount of capital and managerial skills, its activities cannot be diversified.

• Limited scope for opportunity

It offers limited opportunities to his employees. Due to the limited scope of expansion and development of business, its employees get limited opportunities for training, higher studies, career development, attractive salaries and other benefits.

(Karna, Khanal, and Chaulagain)(Khanal, Khatiwada, and Thapa)(Jha, Bhusal, and Bista)

Bibliography

Jha, P.K., et al. Economics II. Kalimati, Kathmandu: Dreamland Publication, 2011.

Karna, Dr.Surendra Labh, Bhawani Prasad Khanal and Neelam Prasad Chaulagain. Economics. Kathmandu: Jupiter Publisher and Distributors Pvt. Ltd, 2070.

Khanal, Dr. Rajesh Keshar, et al. Economics II. Kathmandu: Januka Publication Pvt. Ltd., 2013.