what do you understand by sole proprietorship? write merits and demerits
Answers
Answer:
Sole proprietorship is the simplest and easiest to form. It does not require legal recognition and attendant formalities.
...
Disadvantages:
Limited Resources: A proprietor has limited resources at his/her command. ...
Limited Ability: ...
Unlimited Liability: ...
Limited Life of Enterprise Form
Answer:
SOLE PROPRIETORSHIP
This simply refers to one man business. It is where one person starts a business enterprise and therefore he is the only share holder. However, he can employ organizers and labor force to assist him so as to achieve his objectives. It is the oldest form of business enterprise and it is common in retail, agriculture and direct service sectors.
Merits :MERITS OF SOLE PROPRIETORSHIP
1. Sole benefits:
A sole trader enjoys all the profits generated by his business.
2. Minimal legal formalities:
There are minimal legal formalities required when forming the business. What is mostly required is a trading license which is offered at a small fee.
3. Secrecy:
A sole trader enjoys the top secrets of his business. These are normally the secrets that make his business successful and no one else can know it.
This is because employees and customers are few in number, hence, he is able to know them individually consequently attending to their problems.
5. Freedom of action:
A sole trade does not need to consult anyone when making decisions. This is so because he is the only and final decision maker. Decisions can be made quickly.
6. It is flexible:
Changes can be made within a short period and time.
DEMERITS OF SOLE PROPRIETORSHIP
1. Lack of enough capital to expand the business. This is because he does not have enough security to acquire a big loan.
2. Unlimited liability:
This simply means that a sole trader bears all the losses of the business when it fails.
3. Poor decision making:
The owner often makes quick and poor decisions. This is because he might lack specialization in some areas of decision making e.g. specialization in financial markets.
4. Lack of Continuity:
The death of a sole trade may affect the continuity of the business. In most cases, the business collapses when the owner dies
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