Friday, December 20, 2019

SOLE PROPRIETORSHIP



  • SOLE PROPRIETORSHIP
  • BUSINESS ORGANIZATION AND MGMT( BUSINESS STUDY)
  • CS /CA FOUNDATION
  • BY DR. SHASHI AGGARWAL
  • MEANING
  1. A SOLE TRADER IS A PERSON WHO SET UP BUSINESS WITH HIS OWN RESOURCES, MANAGES THE BUSINESS HIMSELF BY EMPLOYING PERSONS FOR HIS HELP AND ALONE BEARS ALL  THE GAINS AND RISKS OF BUSINESS.
  2. MUST BE A PERSON TO ENTER INTO CONTRACT. THE BUSINESS TO BE CARRIED ON SHOULD BE ALLOWED BY LAW
  3. IN SOME CASES A PERSON MAY BE EXPECTED TO TAKE A LICENCE FROM COMPETENT AUTHORITIES BEFORE HAND
  4. NO OTHER LEGAL FORMALITY IS ESSENTIAL FOR STARTING A SOLE TRADE BUSINESS
  5. THIS TYPE OF BUSINESS IS ONE MAN SHOW AND THE CAPACITIES OF THAT PERSON MAY CERTAINLY BE LIMITED
  6. LIABILITY IS UNLIMITED
  • DEFINITION
  • S.R. DAVAR ,” THE SOLE TRADER IS A PERSON WHO CARRIES ON BUSINESS OF HIS OWN, THAT IS, WITHOUT THE ASSISTANCE OF PARTNER. HE BRINGS IN HIS OWN CAPITAL AND  USES ALL HIS LABOUR. HE ALSO GETS HIMSELF ASSISTED BY OTHERS TO WHOM HE PAYS A SALARY BY WAY OF REMUNERATION”
  • L.H HANEY ,” THE INDIVIDUAL ENTREPRENEURSHIP IS THE FORM OF BUSINESS ORGANIZATION ON THE HEAD OF WHICH STANDS INDIVIDUAL AS THE ONE WHO IS RESPONSIBLE,WHO DIRECTS OPERATION DN WHO ALONE RUN THE RISK OF FAILURE.


  • CHARACTERISTICS
  1. INDIVIDUAL INITIATIVE
  2. UNLIMITED LIABILITY
  3. MOTIVATION
  4. SECRECY
  5. PROPRIETOR AND PROPRIETORSHIP ARE ONE
  6. OWNERS AND BUSINESS EXIST TOGETHER
  7. LIMITED AREA OF OPERATION
  • CHARACTERISTICS
  • INDIVIDUAL INITIATIVE :- AT THE SINGLE PERSON. HE MAKES THE BLUE PRINT OF STARTING THE VENTURE AND ARRANGES VARIOUS FACTORS OF PRODUCTION
  • UNLIMITED LIABILITY :LIABILITY IS UNLIMITED. THE LIABILITY IS NOT LIMITED ONLY TO HIS INVESTMENT IN THE BUSINESS BUT HIS PRIVATE PROPERTY IS ALSO LIABLE FOR BUSINESS OBLIGATIONS
  • MANAGEMENT AND CONTROL :-THE WHOLE BUSINESS IS MANAGED BY THE SOLE TRADER. HE MAY TAKE THE HELP OF OTHER BUT CONTROL LIES WITH HIM
  • MOTIVATION :- AS HE IS SOLE OWNER OF THE BUSINESS, HE TAKES ALL PROFITS AND BEAR LOSES. DIRECT RELATIONSHIP BETWEEN EFFORTS AND REWARD
  • SECRECY : ALL IMPORTANT DECISIONS ARE TAKEN BY THE OWNER HIMSELF. SO THERE IS SECRECY
  • PROPRIETOR AND PROPRIETORSHIP ARE THE SAME PERSON
  • OWNER AND BUSINESS EXIST TOGETHER:-THE BUSINESS IS DISSOLVED IF THE OWNER DIES,BE
  • LIMITED AREA OF OPERATION: REASON BEING THE LIMITED RESOURCES AND MANAGERIAL ABILITIES OF THE SOLE TRADER
  • LEGAL POSITION OF SOLE TRADE BUSINESS
  1. NO SPECIFIC LAW
  2. WILL BE SUBJECT TO GENERAL LAWS OF THE LAND
  3. NO DISTINCTION BETWEEN BUSINESS AND BUSINESSMAN
  4. UNLIMITED
  • ADVANTAGES
  • EASE IN FORMATION : NO LEGAL FORMALITIES ARE REQUIRED TO BE PERFORMED. EASY TO SET UP
  • BETTER OF CONTROL : BUSINESS IS UNDER ONE MAN CONTROL. AUTHORITY AND RESPONSIBILITY LIE WITH THE SAME PERSON. DECISIONS ARE TAKEN QUICK. BUSINESS IS CONTROLLED IN EFFECTIVE MANNER
  • FLEXIBILITY IN OPERATIONS :_RUN ON SMALL SCALE
  • SECRECY:CAN MAINTAIN BUSINESS SECRETS, AS HE IS NOT EXPECTED TO SHARE HIS TRADE SECRET WITH ANY ONE
  • EASE TO RAISE FINANCE:HE IS ABLE TO CREATE GOODWILL FOR HIS BUSINESS AND AS HIS LIABILITY IS UNLIMITED,CREDITORS CAN HAVE CLAIM ON HIS PROPERTY
  • DIRECT MOTIVATION: DIRECT RELATION BETWEEN EFFORTS AND REWARDS AND HE TAKE KEEN INTEREST IN THE WORKING OF THE BUSINESS.
  • QUICK IN DECISION MAKING:-ALL IMPORTANT DECISIONS ARE TAKEN BY ONE PERSON. HE CAN TAKE QUICK AND TIMELY DECISIONS.
  • ADVANTAGES
  • INEXPENSIVE MGMT :-OWNER,MANAGER AND CONTROLLER OF THE BUSINESS, HE HAS NO NEED TO APPOINT ANY EXPERT
  • NO LEGAL RESTRICTION : NO LEGAL FORMALITY TO SET UP THE BUSINESS AND NO NEED TO SUBMIT THE RESULT TO AUTHORITIES
    SOCIALLY DESIRABLE :-BUSINESS IS ON SMALL SCALE AND PROVIDES EMPLOYMENT
  • SELF EMPLOYMENT : OFFERS THE MEANS OF SELF EMPLOYMENT AND HELP IN EARNING HIS LIVELIHOOD
  • HEALTHY RELATION WITH EMPLOYEE:DIRECT RELATION WITH THE EMPLOYEES AND THIS ENABLES THE EMPLOYERS AND THE EMPLOYEES TO UNDERSTAND AND APPRECIATE THE DIFFICULTIES OF EACH OTHER.
  • DISADVANTAGES
  • LIMITED RESOURCES :-RESOURCES ARE LIMITED. HE MAKES INVESTMENT FROM HIS FAMILY SOURCES ONLY. LIMIT TO WHICH A SINGLE PERSON CAN INVEST.
  • LIMITED MANAGERIAL ABILITY :-MAY NOT BE EXPERT IN EACH AREA  AND AS THERE ARE MANY COMPLEXITIES IN THE BUSINESS AND HE WILL NOT COPE IT AND TAKE THE RIGHT DECISIONS
  • UNLIMITED LIABILITY:-HIS PRIVATE PROPERTY CAN BE ASSIGNED FOR HIS BUSINESS LOSS
  • UNCERTAIN CONTINUITY :-BUSINESS CONTINUE AS FAR AS THE SOLE PROPRIETORSHIP IS THERE
  • LIMITED SCOPE OF EMPLOYEES :-CANNOT ATTRACT TRAINED AND QUALIFIED PERSONS FOR THE REASON OF LIMITED CAREER OPPORTUNITIES
  • MORE RISK  AND NO LARGE SCALE ECONOMIES
  • SUITABILITY
  • WHERE MARKET IS LOCAL : SCALE WILL BE SMALL AND LOW CAPITAL IS REQUIRED
  • PERSONAL CONTACT :-NEED FOR PERSONAL CONTACT WITH CUSTOMERS. LIKE DOCTOR AND LAWYER
  • SPECULATIVE BUSINESS :- WHERE QUICK DECISIONS ARE TAKEN DUE TO DEMAND PRICE OF PRODUCT CHANGE QUICKLY.
  • SOCIAL DESIRABILITY OF SOLE PROPRIETORSHIP
  1. PROVIDES EMPLOYMENT TO LARGE SCALE
  2. A PERSON WITH SMALL RESOURCES CAN START A BUSINESS AT SMALL SCALE
  3. AS IT ST RATED AT LOW SCALE
  4. PROVIDING GOODS AT LOW PRICES
  5. ACTS AS CONSTRAINS ON THE MONOPOLISTIC TENDENCIES OF OTHER FORM OF ORGANIZATION
  6. PURCHASE GOODS FROM SMALL PRODUCERS AND SELL THEM TO CONSUMERS. A NUMBER OF INTERMEDIARIES ARE  ELIMINATED



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