Question

Features of sole trading concern.

Answer 1

“The sole proprietorship is an informal type of business owned by one person”.(Prof. James L. Lundy).

Features of sole trading concern are as follows:

1. Minimum Government Regulations: There are minimum government regulations on the activities of a sole trader. Proprietary concerns are not governed by any separate law and are easy to form, because no rigid legal formalities have to be followed for either forming, running, or closing down the organization.
2. Unlimited Liability: The liability of a proprietor is unlimited. The liability of the sole trader can be more than the capital invested by him. Unlimited liability means, there is no distinction between his personal and private property and the property of the business. This means he is alone responsible for all the risks and debts of the firm.
3. Freedom in the selection of Business: A sole trader can select any business as per his desire. There is no restriction on the type of business, which may be conducted by the proprietary concern. Any method of keeping books of accounts may be followed by him. Generally, sole traders in India adopt the Single Entry system of book-keeping.
4. Secrecy: Secrecy plays an important role in the sole trading concern. The information about all the important matters concerning the business rests only with the owner and no outside party can take undue advantage of it.
5. Individual Ownership: Sole trader is the sole owner of all the assets and resources of the business. There is no other person who shares in the profit or loss of the sole trading concern.
6. Direct contact with customers and Employees: Since the proprietor usually deals directly with his customers and employees, he can maintain good relations with his employees and provide personal attention to his customers
7. Suitable for some special business: There are some special businesses and trades which require individual attention and service and can only be started as a sole trader, for example, beauty parlour, Cakeshop, and Agricultural products.
8. No sharing of Profit and risk: A proprietor gets all the profits of the business concern and assumes all the losses and risks involved in the business. There is nobody to share in his profit and losses.