A sole proprietorship is the oldest business entity in which an individual controls his own capital, ability and intellect to control its affairs and is solely responsible for the decisions of its operations. This is also known as sole proprietorship or sole proprietorship.
The individual can run his own business or seek the help of employees. This is the first stage in the evolution of the forms of business ventures, and therefore the oldest of them.
As a sole proprietor, building in the company is easy and simple. The person concerned must decide to run a business and find the necessary capital.
For this purpose, he may often rely on his own savings, or he may borrow partially or completely from friends or relatives.
Since the liability is unlimited, the loss can be avoided as the owner is very careful in his business activities.
This type of business is usually set up on a small scale due to limited finances and limited management skills. In addition, no legal action will be taken against a particular type of business. Bookstores, tea vendors, grana shops and shoe stores are examples of privacy.
Definitions
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| Define Sole Proprietorship, it's Features, Advantages & Disadvantages |
Key definitions of an individual owner:
James Stephenson: "The owner is the only person who does business for himself. He is not only the owner of the capital, but also the organizer and manager in general, he is responsible for all profits and losses.
JL Johnson: "A business entity responsible for providing personal business capital, managing the company's risk, and managing the business."
Features of Sole Proprietorship
Key features of an individual owner of a business organization include:
1. Personal Enterprise: Starting a private business is possible only on the initiative of an individual who wants to start a business. He prepares business plan and organizes various production units. The profit and loss of the business is borne by the individual.
2. Ownership: The sole proprietorship of a business entity includes an owner who integrates all the resources to start a business. He / she focuses only on business matters.
3. Minimal legal systems: The work and activities of a single entrepreneur include a few legal systems. Therefore, its formation and curves are very simple and straight.
4. Unlimited Liability: The main aspect of an entrepreneurship is that the responsibility of an entrepreneur is unlimited. In the event of a loss, his personal assets may be used for business liability if his business assets are not sufficient for business liabilities.
5. Ownership and management are one: In a business, there is no specific entity of the business with the owner. The owner manages the business according to his own skills and ingenuity. Ownership and management are inseparable from the organizational form of a business organization. If the owner dies or goes bankrupt or is removed from the business, the business will terminate.
6. Motivation: A single entrepreneur enjoys all the profits when losses occur. No one else shares the profits and losses of the business. There is a direct link between effort and income. The more he works, the more he earns. This encourages him to expand his business activities. He only carries risks and makes a profit.
7. Confidentiality: All important decisions are made by the same owner. He / she keeps all trade secrets with him / her. Trade secrets are important for small businesses to grow and avoid competitors coming into the same business.
8. No separate company: Ownership is not a separate entity from the business owner. The same owner and business are the same. The sole owner is responsible for everything that happens in his / her business.
9. Personal control: The owner always has the power to control and regulate the privacy business. He / she prepares various projects and implements them under his supervision. He / she does business as he / she wishes.
10. Limited Operations: An individual owner usually has only limited activities because the sole proprietor has limited resources and management skills. He / she can only provide limited financial assistance and can oversee a small business.
Advantages and Disadvantages of Sole Proprietorship
Advantages of Sole Proprietorship
The basic benefits of a privacy business are:
1. Easy to create and simple: Creating sole proprietorship of a business organization is very easy and simple because it requires less legal methods and less time. Anyone who wants to start a single business can start without wasting time. Another advantage is that the sole proprietor can terminate the business at any time.
2. Immediate decision and immediate action: As mentioned earlier, no one interferes in the affairs of the privacy business. Therefore, he / she can make quick decisions on various issues related to the business and take immediate action accordingly. Results are unlikely to be delayed.
3. Flexibility in operations: A privacy concern usually operates on a small scale. If any change in operation is required, it is possible without great expense. Small Anxiety can adjust its production method to suit changing needs. It does not require as many methods of joint venture to expand or reduce business operations.
4. Direct Motivation: The owner enjoys the full benefits of the business. He / she tries to integrate his / her heart and soul into the business to make as much profit as possible. There is a direct link between effort and income. It encourages and motivates the owner to work hard and run the business efficiently and effectively.
5. Keep trade secrets: Trade secrets are known only to one owner. He / she does not have to disclose any information to others until he / she decides for himself / herself. He was not expected to release his business accounts. Secrecy is very important for small business interests.
6. Personal communication with customers: It is easy to maintain a good personal relationship with customers and employees as the owner handles everything related to the business. By knowing the likes, dislikes and tastes of the customers, the owner can change his activities accordingly. Similarly, very few employees work directly under one employer, which helps maintain a harmonious relationship with them and keep the business running smoothly.
7. Fundraising is easy: Only a single owner can create good character for his business through his hard work. This helps him to establish creditworthiness in the market. The sole trader tries to repay the loans quickly so as not to lose market sentiment.
8. Socially desirable: single human trade is generally small. Many individual traders have entered into different types of businesses, which helps to avoid accumulation of wealth. Consumers do not trust big business. Therefore, personal business is socially desirable.
9. Self-employment: The sole proprietorship of the business provides a means of self-employment for individuals who do not wish to operate under the supervision of others. Since not everyone has a job for a living, individuals can easily start a small business as a small owner.
10. Inexpensive Management: Since the sole proprietor is the owner, manager and controller of his business, there is no need to hire specialized staff for various activities of the business. He / she personally oversees all activities and avoids wastage in business. Thus, a large amount of management costs will be saved.
Disadvantages of Sole Proprietorship
Private business can only be affected by the following disadvantages;
1. Limited resources: The resources of an individual owner are always limited. As a sole proprietor, it is not always possible to allocate sufficient funds from your own sources. Again, borrowing from friends, relatives, or banks is one of the consequences. Therefore, the owner is less likely to raise funds for his business.
2. Unlimited Liability: The liability of an individual owner is unlimited. His / her personal assets may be used to cover business losses and liabilities. Unlimited responsibility controls his work and tries to be careful in taking risks. This can be detrimental to the growth and development of the business.
3. Limited Management Skills: Lack of management skills always affects the sole owner of the business. An individual should not be an expert in all areas such as buying, selling and financing.
4. Lack of continuity: The same business continues as long as the same owner lives. The continuity of the business is related to the life of the owner. Illness, death or bankruptcy can cause a trader to terminate his business. The heir of the same owner has no interest or ability to continue the business. Therefore, the continuity of the privacy business is very uncertain.
5. Not suitable for large scale operations: This type of business system is not suitable for large businesses as the financial resources and management skills of an individual owner are limited.
6. Wrong Decisions: An individual owner must make all the decisions himself. He cannot approach experts to gain proper knowledge about various aspects of business. Therefore, it is possible to make wrong decisions, which can lead to loss.
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