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Question
Explain the characteristics of a sole trading business.
Solution
1. Ownership by one man:
This is owned by a single person. The sole trader contributes the required capital. He is not only the owner of the business but also manages the entire affairs.
2. Freedom of work and Quick Decisions:
Since an individual is himself as an owner, he need not consult anybody else. Hence he can make quick decisions.
3. Unlimited Liability:
When his business assets are not sufficient to pay off the business debts he has to pay from his personal property.
4. Enjoying Entire Profit:
He strives tirelessly for the improvement and expansion of his business and enjoys all the benefits of his hard work.
5. Absence of Government Regulation:
A sole proprietor concern is free from Government regulations. No legal formalities are to be observed in its formation, management, or in its closure.
6. No Separate Entity:
The sole trading concern comes to an end with death, disability, insanity, and insolvency of the individual.
7. Maintenance of Secrecy:
Since he/she manages all the affairs of the business, the secrecy can be maintained easily.
