Question

Explain the merits of a sole proprietorship firm?

Answer 1

A sole proprietor enjoys the following benefits.

(a) Ease in formation and closure of business: There are hardly any legal formalities to be fulfilled for setting up a sole proprietorship firm. However, if a proprietor is dealing in drugs and liquor products, then a licence has to be acquired. The procedure for closing down a sole proprietorship firm is also hassle-free and easy.

(b) Quick decision making: A sole proprietor enjoys complete control over the business. This makes decision making quick and easy.

(c) Direct incentive: A sole proprietor is the sole bearer of all types of risks associated with the business and, at the same time, is the single recipient of all the profits and gains earned in the business. Thus, this direct link between efforts and rewards motivates the sole proprietor to operate the business efficiency and effectively.