Question

Merits and demerits of soletrading

Answer 1

Hello !

Merits

1. Easy to start and dissolve:

A sole proprietorship can be setup easily and quickly. No legal formalities and expenditures are involved in the establishment of a proprietorship. There is no need to associate others or to enter any agreement. Only a license may be needed in special cases. The owner can start business operations as and when he desires. Similarly, a sole proprietorship can be closed down very easily and quickly.

2. Motivation to work:

The proprietor is all alone entitled for all the profits and the losses of the business. He bears the complete risk and there is nobody to share the risks, workload or any profit or losses. There is direct relationship with efforts and reward. There is an incentive to work hard. The proprietor is motivated to make the best possible use of his skills and resources to maximize the profits.

3. Quick decisions:

The sole proprietor is completely free to take all decisions and to implement them. He doesn’t need to consult or seek others approval. Quick decisions and prompt actions are helpful to improve the efficiency of business operations.

4. Independent control:

The proprietor alone takes all the decisions pertaining to the business. He is not required to consult anybody. Ownership and management are vested in a person. There is no governmental intervention in day to day activities.

5. Business secrets:

The sole proprietor can keep the secrets to himself and these secrets are not known to competitors or others.

6. Personal contact:

A sole proprietor is in a position to maintain intimate contacts with his customers and employees. He can enter to the requirements of each and every customer. Close personal touch increases the competitive strength of the business.

Demerits

1. Sole proprietorship has limited capital

2. Sole proprietor only uses his ideas and innovation capacity. So there is limited managerial ability

3. Sole proprietor must work more to earn more profit. Higher profit generation is important. So, there is dull and monotonous wok.

4. Death of sole proprietor causes death of sole proprietorship.

5. There is no specialization in decision taking. So there can be chances of taking wrong decisions

6. There is low investment resulting in limited areas of operation.

Hope It Helps u :)

Answer 2

MERITS..

1. the start up costs are low
2. we can keep all the profits.
3. Establishing of new business simply.
4. we have maximum privacy.
5. it's easy to change the legal structure..if any circumstances come into business.

DEMERITS...

1. We have unlimited legal liability for debts.
2. All the responsibility is upon you.
3. Retaining high employees can be difficult
4. our capacity to raise capital is limited.
5. it's tough to carry the load of whole trade..