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Who is a sole trader and advantages and disadvantages of sole trading business

Who is a sole trader and advantages and disadvantages of sole trading business

A sole trading is a oldest form for business. In a sole trading, business organisation are carried out by only one proprietor. In this type of business organisation he carries on with his private resources. A sole trader brings his own capital and uses all his labours. If is he in need of a additional capital, he brings it by loans or from his friends and relatives. He does his work for himself or may be help from his family members. If he get any lose he will brares that if he get profit he enjoys it.

The sole trader is his own boss. He freely makes his own decisions and manages the business. The judgement of the all matters concern to his business makes himself. He bears the entire lose or risk himself, deduct the total benefits. He own all and risk, he had unlimited freedom of organising things in his business. He can carry on any business of his choice when only a licenced, rules or laws enforced by government. he cannot be entering into a business, which doesn’t have permission or prohibited in the state. He doesn’t require registration of business.  A person who has a capital, interest, ability and knowledge over business can start a business of his own choice.

Advantages of sole trader

Easy formation

For a sole trading small amount of capital is enough to start a business. There is no legal formalities to star this type of business. Even registration is not needed. It is very simple to form sole trading.

Economy in management

The owner look after the business for himself. He tries to find all causes for wastage and losses of the company. He can take dynamic steps to prevent or remove them. The operating cost of management are also less that’s why sole trading is very economical.

 Motivation to work

There is directe relationship between the efforts and rewards. It serves as a positive motivational influence on the proprietor to manage the company efficiently. And also he mange the company to the best of his abilities.

Promptness in decision making

In a sole trading the decision of the proprietor are the final decision. He is only master for his own thoughts and experiences in his concern. He has no need of  consulting other while making decision for the affairs his concern.

Business secrecy

In any business enterprise maintaining of secret is an important factor. Secrets related to the business policies and management of company can be maintained strictly in the sole trading concern.

Disadvantages of sole reading

Limited capital

The capital available for a sole trader business is limited, because of a single person individual has to provide it in sole trading concern. No one would be enough to supply unlimited amount of capital to his business.

Limited management ability

The management ability of the owner is limited, because of an individual may not be a perfect in all matters in business organisation. All the decision may not be correct.

Unlimited liability

In a sole trading proprietor has a unlimited liability. The creditors can recover their loan amount from the assets of the concerned business and also from his private properties.

Lack of continuity

The business may stop if something happens to the proprietor life or health limits the duration of the company. The business ends after the death of an sole trader.



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