Question

Define a sole Trading concern. Explain its merits and demerits.

Answer 1

Definition: “A sole trader is a person who trades on his own account rather than in partnership or as a member of a company.” (Michael Greener)
A sole trading concern has the following merits over other forms of commercial organisation:

1.      Ease in formation: - a sole trading concern is considerably easy to start and to conduct its activities. There are least formalities in the formation of a sole trading concern. A sole trader may also close down the business as per his own will.
2.      Complete control: - The sole trader can have complete control over business operations. He can take his own decision regarding the business activities. No need to consult with any one
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Answer 2

A Sole Trading Concern can be defined as follows:

Explanation: The term 'Sole' means 'Single'. A sole trading concern refers to that form of the organization where there is a single person running the enterprise. The entire business will be controlled and managed by a single person who is responsible for both profits and risks.

Merits:

• No formalities: It is very easy to start and close this form of the organization as no legal formalities are attached to it.
• Prompt Decisions: As there is only a single person handling the entire business, so he is not supposed to take anyone's opinion before taking any decision and can implement the same at earliest.

Demerits:

• Limited Capital: All the funds are raised from the pocket of the owner himself which limits the availability of the capital for running of the business.
• Limited skills: Every idea and innovation is being done solely by the owner which limits the managerial ability and skills in the business.

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