Sole ownership or proprietorship:
The sole trading concern is established and managed by the single person. The whole amount of investment is being made by a single person. The sole trader individually invests and earn the profit.
The liabilities of sole trading concern are unlimited. It means, in the case of loss of business the sole trader has to sell his/her personal property to pay a debt. Sole trading concern has liability which is not limited to the property of a business.
Sole management and control:
In these form of business owner and manager are same. The owner himself/herself directly involve in business activities and manages the business affairs. The owners also engaged in the control of the various activity of a business.
No legal existence:
The sole trading concern is not required to register company at register office legally. In Nepal, it can be established in the development of commerce and industry. Therefore, it does not exist in the eye of law. The owners of the business are one and same.
In this business, it is very easy to maintain the secrecy of information. The information relating to business are not required to share with other. Therefore, this form of business has highest level of information secrecy.
No sharing of profits:
Sole trading concern is established and managed by the single person. Profit is not required to share with another. Sole trader individually enjoys the profit and bears the risk as well by himself.
The sole trader can freely make the decision. He or she need not take consent of others while making the decision. Therefore, in this form of business decision making is fast.
Limited area of operation:
Since the sole trading concern is invested by the single person, there is less scope for expansion and growth of it.Sole trader individually can't manage the big size of a business and he can't manage the big size of a business and he cannot invest for this as well.
Undivided risk and responsibility:
In this business, risk and responsibility can be shared with another person. The sole trader individually takes all kinds of risk. Sole traders personally responsible for accomplishing all activities of a business.
Easy to commence and dissolve:
A sole trading concern is owned, managed, controlled and invested by a single person so that it can easily establish and close it down whenever he/she wishes. There are limited and simple legal formalities to start and close the business.
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 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.
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.
The efforts of sole trader and his reward have the direct relationship in the sole trading concern. The sole trader enjoys the total profits of the business alone. It directly 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 to him.
The owner being both manager and employee can save some office and administrator expenses and attains economy operations of a business. Family members can also be used for the personal job in sole trading concern.
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 sponsor to social functions. Hence, it provides benefits to the society.
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.
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.
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.
Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal. Business Studies. Kathmandu: Taleju Prakashan, 2067.
Pant, Prem R., et al. Business Studies. Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.
The advantages of sole trading concern:
The disadvantages of sole trading concern are:
The advantages of sole trading concern are explained below:
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.
The disadvantages of sole trading concern are: