Mr. Ravi runs a small shop in the market. What merits will be there in this Sole Proprietorship form of Organization?
Answers
Answer:
(i) Quick decision making
(ii) Confidentiality of information
(iii) Direct incentive
(iv) Sense of accomplishment
(v) Ease of formation and closure:
Explanation:
Sole proprietorship offers many
advantages. Some of the important ones
are as follows:
(i) Quick decision making: A sole
proprietor enjoys considerable degree
of freedom in making business
decisions. Further the decision making
is prompt because there is no need toconsult others. This may lead to timely
capitalisation of market opportunities
as and when they arise.
(ii) Confidentiality of information:
Sole decision making authority enables
the proprietor to keep all the
information related to business
operations confidential and maintain
secrecy. A sole trader is also not bound
by law to publish firm’s accounts.
(iii) Direct incentive: A sole
proprietor directly reaps the benefitsof his/her efforts as he/she is the sole
recipient of all the profit. The need to
share profits does not arise as he/she
is the single owner. This provides
maximum incentive to the sole trader
to work hard.
(iv) Sense of accomplishment: There
is a personal satisfaction involved in
working for oneself. The knowledge
that one is responsible for the successof the business not only contributes to
self-satisfaction but also instils in the
individual a sense of accomplishment
and confidence in one’s abilities.
(v) Ease of formation and closure:
An important merit of sole
proprietorship is the possibility of
entering into business with minimal
legal formalities. There is no separate
law that governs sole proprietorship. As
sole proprietorship is the least
regulated form of business, it is easy
to start and close the business as per
the wish of the owner