Ch:3 Sole Proprietorship Flashcards
DEFINE SOLE Proprietorship
Sole proprietorship is the type of business organization in which one person owns and operates the business.
Give five examples of sole proprietorship
Retailer
Painter
Carpenter
Tourist guide
Barber
5 characteristics of sole trader ship
Sole ownership
Easy formation
Whole profit
Secrecy
Easy transfer
How is the profit distributed in sole proprietorship
In sole proprietorship the single owner bears full risks of business, therefore he gets total benefit of the business as well as bears full loss.
What is the legal standing/ status of sole proprietorship
In sole proprietorship ,business has noseperate legal entity apart from the sole trader because no permission or registration is required to run the business. In case of dispute, a legal action can be taken against owner and not against business.
What is meant by unlimited liability of the owner in business
The sole proprietorship has unlimited liability. In case of insolvency if business or non payment of business debts, he will be responsible for the payments of the liabilities from his personal assets
Why is life of sole trader ship is limited
The exist and and survival of sole proprietorship is based on good health,active participation or shrewdness of sole owner. Sometimes, wrong decisions or sudden death of owner may stop the activities of sole trader ship
Write 5 advantages of sole tradership
Easy formation
Quick decisions
Business secrecy
Easy dissolution
Flexibility
Why is there total independence in sole proprietorship
In sole proprietorship, the control and supervision of business remains in the hand of one person. Sole trader can do whatever he likes,because there is no interference of any other person in business matters.
Why is single owner so much satisfied with his business affairs
As all business activities are accomplished under the supervision of owner, so he feels personal satisfaction that the business is running smoothly
List 5 disadvantages of sole tradership
Shortage of capital
Unlimited liability
Management problems
Not durable
No legal protection
Why do people have less confidence in sole proprietorship
The owner of sole tradership doesn’t publish his business accounts and there is no legal restrictions to control or windup this type of business . Therefore general public shows less confidence in such type of business organization.
SUGGESTIONS TO PROMOTE SOLE TRADERSHIP (8 points)
Legal protection
Availability of loans
Advisory services
Insurance of business
Establishment of trade center
Refresher courses
Tax concession
Cost of production
Demerits of sole tradership (20)
Shortage of capital
Unlimited liability
Dependant on owner
Difficulty in credit
Lack of skilled person’s
Ineffective distribution of work
Cost of production
Entire burden of loss
Not durable
Lack of public confidence
Lack of inspection
Continuity
Lack of incentives
Wrong decisions
Difficulty in expansion
No legal protection
Lack of employees promotion
Management problems
Lack of advertisement
Lack of innovation
Merits of sole tradership
Easy formation
Personal interests
Quick decisions
Freedom of action
Business secrecy
Contact with customers
Personal relationships
Easy access
Less publicity cost
Easy dissolution
Flexibility
Saving in business expenses
Saving in taxes
Less chances of fraud
Credit facilities
Courtesy
Formation expenses
Entire profit
Honesty
Personal satisfaction
Goodwill of the business
Equal distribution of wealth
Increase in employement
Social benefits
Easy transfer
