Sole Proprietorship: Meaning, Advantages And Disadvantages

Table Of Contents

1.Meaning of Sole Proprietorship
2.Advantages And Disadvantages Of Sole Proprietorship

Meaning Of Sole Proprietorship

The Sole Proprietorship or one-man business is the simplest or oldest form of business organisation. It is owned by a single person who provides the capital for the business, takes the decisions and bears the risk. Though he may have a number of employees he is solely responsible for the success or failure of the business. He takes all the profit and bears all the losses.

The one-man business is the most numerous types of business but it is less important to them the joint stock company in terms of values of capital, most popular form of business in retail trade like farming, transportation and other personal services such as hair-dressing and tailoring.

Advantages Of Sole Proprietorship

1. It is easy to start since no legal formulates are required and the capital required is small.

2. The owner has a direct personal interest in the success of the business and this makes him put in his best.

3. Decisions regarding policy changes are taker quickly because the owner does not need to consult any other person. This makes the organisation flexible.

4. The relationship between the proprietor and the workers is personal intimate and this promotes efficiency in production.

5. The sole proprietor enjoys the profit of the business.

6. He can keep the affairs the business provide. He is not required by the law to make his account public.

Disadvantage Of Sole Proprietorship

1. the liability of the owner for the depths of the business is unlimited. The personal possessions can be sold to pay creditors. If the business collapse and become unable to his debt, this is because the business is not a legal entity separate from it owner.

2. The capital of the business is limited and its limit expander. The business care therefore not enjoy the benefit of large scale production.

3. The owners bears the entire risk of loss alone.

4. The business always collapses or folds at the death of the owner, in other words it does not enjoy the type of continuity which public limited companies have.

Source Of Capital

1. Personal savings.

2. Loans from friends/relatives.

3. Bank loans.

4. Sale of personal property.

Suggested Posts: