Sole proprietorship  

It is the form of business organization in which an individual introduces his own capital, uses his own skills and intelligence in the management of its affairs and is solely responsible for the result of its operations. He may run the business alone or obtain assistance of employees. It is the easiest to form and is also the simplest in organization. The sole proprietor may borrow or use other people‘s money in doing his business.

1. EASY TO START The formation of sole proprietorship is quite easy than partnership and joint stock company. There are no legal formalities for the starting this business, like agreement, memorandum of association, or articles of associations.

2. EASY TO DISSOLVE It is easy to dissolve because the sole trader is not required to take permission for the dissolution either from shareholder in the general meeting as in the case of joint stock companies or consult all the partners in the case of partnership.AB.

3. FREEDOM OF ACTION A sole trader has maximum freedom to take decision at his own end. His decision is final he may expand his business by adding new products or can discontinue old ones. He can wind up his business or he can change his business place from one place to another.

4. FREEDOM OF GOVERNMENT CONTROL He is free from government control to a great extent than any other form of organization. A sole trader is not required to send his periodical balance sheet to the government.

5. OWNERS OF ALL PROFIT No other organization permits to retain cent percent profit they earn. But in sole proprietorship the sole trader is the master of his business and is entitled to retain the entire profit of the business.

6. LOW TAXES He has to pay minimum income tax and other taxes than in partnership and Joint Stock Company. In this manner he saves much out of his profit.   

 1. LIMITED FINANCE The sole proprietorship can face financial problems. He can depend only his own resources. It is neither safe nor easy for him to borrow large amount of money from banks or other financial institutions.

2. DIFFICULTIES IN MANAGEMENT Each individual has particular attitude or ability in particular respects. Modern business is full of complications airing especially from the changing nature of market and the various laws that are being enacted. An individual may not be expert in all matters. Therefore sometimes his decision may be unbalances and would lend to the failure of the business.

3. LIMITED SPAN OF SUPERVISION A sole proprietor however qualified and clever will find it hard to supervise the work of his sub ordinate beyond a certain limit e.g. in ease of large general store owned by single person, it will be difficult for the owner to keep an eye on all the departments and employee and to ensure that the customers are treated nicely. The problems will be more acute if store has its branches in other places.

4. LIMITATION ON SIZE Because of limitation of finance, managerial skills and span of supervision a sole proprietor has to manger the size of the business up to a certain limit. This deprives the firm of the opportunity of reaping the economics of large scale production.

5. UNLIMITED LIABILITY He has great risks. It is true that he receives all the profits of the business but likewise he has to face the entire losses. Not only the assets of the business but also his private assets will be used to pay off the firm’s debts and losses. Unlimited liability also discourages the expansion of business.