OMTEX CLASSES

THE HOME OF TEXT

AAMINOMTEX

SOLE TRADING CONCERN SOLE PRORIETORSHIP

In a sole trading organization an individual provides capital, uses his

own skill and ability and is solely by responsible for the results of business
operations. All the profits of business are enjoy by him and all the losses
are suffered by him alone.

The features of sole trading Concern are:-

(a) It is promoted and formed by an individual who contributes towards
its capital all on his own.
(b) The Individual who contributes capital also manages the business.
(C) He bears all the risks of business.
(d) He enjoys all the profits and suffers all the losses of business by
himself.
(e) It in one of the oldest and simplest form of business.
(f) lt can be easily formed.
(g) There is flexibility in this form.

Advantages of Sole Trade Concern.

(a) Easy Formation : Formation of sole trading concern does not
involve lengthy legal formalities. Because of this it can be formed
easily and quickly.
(b) Business Secrecy: Since the business is managed by a single man
business secrecy can be maintained. Moreover he need not publicise
his activities through accounts or reports.
(c) Personal devotion.: The owner and manager of a sole trading
concern Is the same person. Sine there is direct relationship
between effort and reward the sole trader devotes more time and
attention to business.
(d) Quick decision and prompt action. : Since the decisions
regarding business are taken by a single person, the decision are
promptly taken and executed.
(e) Flexibility.: A sole trader can expand, contract, modify or adjust his
business according to the needs of time and environment.
(f) Personal touch.: Since the sole trader handles all the areas of
business himself, he develops personal rapport and understanding
with customers suppliers, government authorities and public, which
will benefit him In the long run.
 OMTEX CLASSES
THE HOME OF TEXT
AAMINOMTEX

(g) Economy In Business Management:-: The managerial expenses

will be the least in a sole trading concern because It Is a one man
organisation.
(h) Limited government control : Compared to the other forms of
organisations a sole trading concern Is subjected to least
government regulation and control, In the ar.8s of phonation,
management, expansion and dissolution.

DISADVANTAGES OF SOLE TRADING CONCERN:-

(a) Limited Capital :- The capital is limited since it is contributed by a
single person. This affects expansion of business.
(b) Limited Managerial Skill:- There is a limit to education,
knowledge1 skill, exposure and ex-ence of a sole trader. He is not an
expert in all the fields of business. Thus he is handicapped In certain
areas of business or beyond a particular stage of growth.
(c) Unlimited liability:- He is solely personally liable for all the losses
of the business. This kills dynamism in business activities.
(d) Lack Of Continuity :- The business of a sole trader is unstable
because It is likely to be affected by death, insolvency, insanity or
physical disability of the trader.
(e) Absence of economies of scale :- A sole trader cannot enjoy the
economies of large-scale purchasing and selling due to limited
capital and limited size of operations. His bargaining capacity is also
weak
SUITABIUTY OF A SOLE TRADING CONCERN:-
A sole trading concern is suitable under the following circumstances:
(a) If the business operations are carried out In the local market.
(b) If the risks involved in business are limited.
(C) If the business requires limited capital.
(d) If personal attention is required to be given to customers.
(e) If the quick decisions are to be taken in business.
(f) If the business is simple enough to be managed.