Definition:
"Sole Proprietorship means the business of one person. in this business only a single person invests his capital and efforts. He is solely responsible for all the losses and enjoys all the profit".
According to D.W.T Stafford :
"it is the simplest form of the business, which is owned and controlled by one man".
According to Mr.Matin:
" This type of organization in which one person owns and operate a business for profit.
According to E.T.Elbourne:
" Sole Proprietorship is a business initiated and operated by one individual who carries all financial and administrative responsibilities employing such assistants as may be necessary.
Examples of Sole Proprietorship :
1. Retailers
2. Accountants
3. Doctors
4. Shops of ready-made garments
5. Painter etc.
ADVANTAGES:
1. Business Freedom :
Sole trader enjoys the business freedom. he is not bound to take suggestions from others and no one is allowed to make interference in his business.
2. Credit Facilities:
The liability of sole proprietorship is unlimited. So banks and other financial institutes easily agree to give him loan business they know that in case of his insolvency, his personal property will be sold and the amount of loan will be recovered.
3. Direct Relationship:
As the business is on small scale, so it is possible for sole trader to make direct relationship with customers and workers . in this way, he becomes able to know the taste of customers and problems of workers.
4. Easy Formation:
It can be easily established. No formalities are required to be fulfilled for starting this type of business. A person may think to start such business in morning and he can start it in evening.
5. Easy Dissolution:
Sole Proprietorship can be easily dissolved. No formalities are required to be fulfilled for the dissolution of his business.
6. Entire Profit:
The owner of his type business enjoys all profit himself but in partnership and in joint stock company Profit is distributed among the number of partners and share holders.
7. Low Taxes :
As the business is on small scale , so sole trader has to pay low taxes to government, which are levied on his individual income, but the joint stock company is taxed twice.
8. Personal interest :
in this type of business, the proprietor takes keen interest and tries to know the taste, fashion and habits of customers because he knows that if there will be any loss. He will be responsible himself.
9. Secrecy :
Secrecy is the base of success of business and a sole trader maintains a high standard of secrecy of profit and special techniques of production. as there is only one owner in this business, so there is no chance of leakage of secrecy.
DISADVANTAGES:
1. Chances of Fraud :
Due to absence of proper accounting records, there are more chances of frauds in this type of business organizations.
2. Difficulties In Credit :
Bank and other financial institutions hesitate to advance the loan to sole proprietor because his financial position is not strong.
3. Difficulties To Face Crises :
The Sole Proprietorship has a limited capacity to face heavy losses or economic crisis . in the time of heavy losses, business may come to an end.
4. Entire Loss:
Sole trader has a face entire loss of business himself. No other person shares his loss.
5. Limited Resources:
Sole trader has limited resources. So he can not raise capital and due to less capital he can not raise capital and due to less capital he can not produce the goods on large scale.
6. Management Problem :
one man can not perform all types of management and business activities effectively. He may be expert in purchasing but not in accounting.
7. Wrong Business Decisions :
A Single trader is not in a position to fully understand all happenings in the field, as a result of these he make takes wrong business decisions.
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