Merits Of Sole Tradership

| August 20, 2014 | 0 Comments

Define in detail the main Advantages of Sole Tradership? Explain the Merits of Sole Proprietorship?

Merits Of Sole Tradership Wih Picture

Merits Of Sole Tradership:

1. Easy Formation:

A sole proprietor is easy to form and very simple to run. There is no any legal restriction like registration. So, sole proprietorship can be started without any difficulty and wastage of time.

2. Personal Interest:

A sole proprietor has to take keen interest in the business affairs because he is alone responsible for the profit or loss of the business. So a sole proprietor devotes his full time and energy for the success of his business.

3. Quick Decisions:

In such business, a sole trader can make quick decisions according to circumstances for the development of  his business. In this way, he saves precious time because no office formality and consultation form other individuals or institutions is required in this regard.

4. Freedom of Action:

In sole proprietorship, the control and supervision of the business remains in the hands if one person. Sole trader can do whatever he likes for the success of business because there is no interference of any other person in business matters.

5. Business Secrecy:

Business secrecy is considered an important factor for the success of a business. A sole proprietor performs the business functions and makes decisions himself, so he can maintain the secrecy of business easily. Moreover, the audit and publication of business accounts are also not necessary.

6. Contact with Customers:

In this business, the businessman has direct contact with the customers due to limited market or scale, He keeps in view their demand, liking’s and disliking. So, sole trader produces goods according to the demand of the costumers.

7. Personal Relationship:

In sole proprietorship, sole proprietor has personal relationship with the workers because number of workers is limited and he can directly interact with the workers during business hours. So, he can easily understand the problems of the workers and tries his best to solve them timely, which puts the business on strong footing.

8. Easy Access:

Generally, sole traders perform the business activities in their homes or near the homes of customers. Because of this the customers have easy access to the business of sole traders and vice versa.

9. Less Publicity Cost:

Because of less or limited productivity capacity and market, the sole trader has not to bear advertisement expenses for the sale of goods.

10. Easy Dissolution:

The sole proprietorship can be easily dissolved, as there are no legal formalities involved in it. The sale of business may take some days but its activities can be closed at any time.

11. Flexibility:

In such form of business, a sole trader can easily change the business policy at any time according to the market conditions. A sole proprietor can introduced new techniques of production without the consent of any other person. Moreover the nature of business can also be changed if required.

12. Saving in Business Expenses:

Due to limited volume or capacity, the sole tradership does not require the services of experienced or skilled persons and experts, because the sole owner can take help from his family members in the time of need to save expenses.

13. Saving In Taxes:

In such business, the rates of taxes are very low because taxes are imposed on the income of single owner and the level of income remains low due to limited business activities (sales volume).

14. Less Chance Of Fraud:

In sole tradership, the sole owner settles all business affairs and transactions. That is way, there are very less chances of fraud in it.

15. Credit Facilities:

In such business, a sole proprietor can easily borrow the money from his friends and relatives. The lenders know that the private property of owner can be sold for the recovery of debts due to unlimited liability.

16. Courtesy:

The sole owner of the business is responsible for the profit or loss of an enterprise. So, he shows positive and courteous attitude to his employees, creditors and customers which results in the success of business.

17. Formation Expenses:

Due to simple procedure of formation, the sole tradership has to bear low starting cost as compared to other forms. Moreover, it can be established with less capital because no legal or registration fee etc., is required for this purpose.

18. Entire Profit:

A sole proprietor is only businessman who enjoys 100% profit and no one else can share his profit because he performs all the business functions solely. Due to this, he willingly works hard for day and night.

19. Honesty:

Due to unlimited liability of business, the sole trader performs his functions or duties honestly and effectively to make the business successful.

20. Personal Satisfaction:

As all the business activities are accomplished under the supervision of sole owner, so he feels personal satisfaction that the business is running smoothly.

21. Goodwill of the Business:

Because of his direct relations with the customers, the sole trader can increase the goodwill of business by running business according to their need and demand.

22. Equal Distribution of Wealth:

The development of sole tradership has abolished the problem of concentration of wealth in few hands. The progress of sole proprietorship results in equal distribution of wealth because a large community is connected with this business due to its small size or volume.

23. Increase in Employment:

Sole tradership provides employment opportunities to that large number of people who have limited source, less potential and abilities.

24. Social Benefits:

Sole proprietorship is not only beneficial to its owner but also proves fruitful for the society. (e.g.) This organization solves the financial problems of a persons, makes him independent and courageous to take decisions in difficult situations.

25. Easy Transfer:  

Such type of business can be easily transferred to another person without any restriction or legal formality.


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