Legal Position of Sole-Trade Business: Following points will explain the legal position of a sole-trade business: i There is no specific law under which this business requires registration etc. A Joint Stock Company has to be incorporated under Companies Act, , a partnership firm is governed by Partnership Act, , a sole trade business is not governed by any such statute.
So this business can be started and dissolved at the discretion of the owner without reference to any statutory provisions. If there is a provision of getting a licence for setting up a particular business, then the sole trader will also get the licence before setting up such a business. A person desirous of starting a wine shop is expected to get a licence from the State Government.
A sole trader wanting to enter this business will certainly be expected to comply with this law. The business exists only with the sole trader. If he disappears from the scene due to death or some other reason, then the business will also be dissolved. The proprietor and his business have one personality. If a business is dissolved then no distinction is made between business and private assets and business and private loans of the sole trader. Suitability of Sole Proprietorship: The amount of capital and managerial skill required for a particular business influences the decision about form of organisation.
When the scale of operations is small then capital requirements will be less and sole proprietorship is the most suitable form of organisation. With the improvement of industrial technology and devising of new production methods, the needs for capital have increased. Other forms of organisation like partnership and joint stock company have also become popular. There are certain types of businesses where sole proprietorship is still the most suitable form of organisation.
This form of organisation is also suitable under certain circumstances. These circumstances are as follows: i Where market is local: When market for a product is limited only to a particular place, scale of business operations will be small. The amount of capital required will be less and the ordinary managerial skill will be sufficient. Under such situations, sole proprietorship will be most suitable. Most of the retail trade is controlled by sole traders. The customers may have their likings and preferences for particular things.
Under these situations sole proprietorship form of organisation will be suitable. A doctor and a lawyer will be required to have direct contact with his patients and clients. A customer may have his own liking for getting his clothes stitched. So, in all these cases sole proprietorship will be more useful.
The businessman is required to take prompt decision. A sole proprietor can take immediate decisions as warranted by the situations. He need not consult anybody else. So he can decide the things himself. No other form of organisation will be as suitable for speculative business as sole proprietorship.
Social Desirability of Sole Proprietorship: The limitations of sole proprietorship have necessitated the development of other forms of organisation. The wide spread use of other forms of organisation has not eliminated sole proprietorship; rather it continues to be most popular form of organisation in every country.
This form of organisation has a social desirability too. Its social necessity is because of the following reasons: i Employment to large number of persons: This form of organisation is started by one person but he takes other persons for his help.
Easy to get loan: The sole trading concern is a one man business organization. It is easy to start and close. A sole trader has personal relations with a large number of people. He can easily convince other people to provide loan him. Economy: The owner being both manager and employees can save some office and administrator expenses and attains economy operations of a business. Family members can be also used for the personal job in sole trading concern.
Social benefits: Sole trading concern has a number of social benefits. It gives employment to other people of the society.
The sole trader earns a better status in the society. He can involve himself in social service, provide employment, give donations and proper sponsors social functions. Hence, it provides benefits to the society. Such limited capital is insufficient for large-scale production and marketing of goods and services. Limited managerial ability It is managed by a single owner who may not have adequate managerial skills and technical abilities. A sole proprietor must be prepared to devote their time, utilizing business methods towards establishing a sound and appropriate foundation.
Doing so may contribute to increased turnover, profits, minimize taxes, and avoid other potential adversities. The selection of a business type by a new sole proprietor is in many instances, motivated by appropriate business experience in a particular field, especially those pertaining to enterprises involving the marketing and selling of defined products and services.
A crucial component of a sole proprietorship within a business plan is the provision of an inherent guideline, for actions that require implementing for a business to achieve growth.
The business name and products are critical aspects in the founding of a sole proprietorship and once selected, should be protected. In the event of a determined brand name being legalized, information regarding trademark protection is available from the U.
Patent and Trademark Office. Finances[ edit ] For the sole proprietor there are a variety of options in obtaining financial support for their business, including loan facilities available from the U. Small Business Administration. The loans are not originated by the SBA, but the administration does guarantee loans made by various independent lending institutions. The primary loan facility for small businesses offered by this agency is the 7 a loan program, designed for general applications.
Many and varied private organizations and individuals seek opportunities to invest and fund a business that may not qualify for traditional financing from institutions, such as banks.
For the sole proprietor, seeking to take advantage of this facility, there are various factors that must be understood and adhered to regarding the loan application. For any small business owner seeking funding, they must consider the debt-to-equity ratio of their enterprise.
The mathematics are simple; greater the finance invested by sole proprietors in their business; easier the obtaining of finance! The SBA statistics show that the majority of small enterprises favor the use of limited equity financing; for example, friends and relatives. Valentine villefort descriptive essay ville de st jean sur richelieu evaluation essay essay on our role in oil conservation district, refugees coming to america throughout history essay chandra sekhar azad essay tourism in brazil essays on friendship studio research paper artist cesar decal jr.
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If he works more, he will earn more. There is no legal requirement to form a sole trade business. He can easily convince other people to provide loan him.
A sole trader can keep all the profits of their business after tax has been paid. Limited companies and its format of financial statements 4. Sole proprietors may register their business using one of two names: 1 their legal name following the registrant's identity card or 2 a trade name . Registration of a business lasts either one or two years, and must be renewed thirty 30 days before its expiry . There are certain types of businesses where sole proprietorship is still the most suitable form of organisation.
Below are some advantages of being a sole trader. The mathematics are simple; greater the finance invested by sole proprietors in their business; easier the obtaining of finance! A customer may have his own liking for getting his clothes stitched. Library essay in english Library essay in english valentine villefort descriptive essay dr essay nebraska a friend in need is a friend indeed opinion essays essayed thesaurus. In this business, sole-proprietor take all risk and responsibility of business. As I said before, all the profits in the business are the owners, everybody likes a good pay day.
He can involve himself in social service, provide employment, give donations and proper sponsors social functions. Small units provide ancillary service to big units. Conclusion 1.
He may employ other person for assistance but ultimate authority and responsibility lies with him. The business is set only after considering various factors. Formation of Sole-Trade Business: A sole-trade business is such a form of organisation which requires no formalities to set it up. The person who starts run sole trading is called sole trader or sole proprietor. The owner works for himself in the sense that he decides what to do and when to do it. Good introductory lines for essays on success Good introductory lines for essays on success ocs painting review essay ap us history essay on slavery word essay on discipline in school attention to details essay writing the wizard of oz allegory essay grapes of wrath ending analysis essay common european values and identity essay assignment proverbe avec essayer in english eastern washington university admissions essays text analysis response essay assignment qualunquemente personaggi e interpretive essay valentine villefort descriptive essay essay about kandy esala perahera , protecting the environment essay words per minute biome essays leaving cert history.
This action should be initiated by a business owner well before starting the borrowing process. The usual decisions for setting up every business are taken care of in sole-trade business also. However, if some business requires a prior sanction of the government then such formalities will have to be completed. The most memorable year essay The most memorable year essay phrasen englisch opinion essay.
There is no legal requirement to form a sole trade business. The proprietor is responsible for all losses arising from the business.
He is in direct contact with the consumers. Unlimited liability The sole trader does not have limited liability to his business capital.
Finances[ edit ] For the sole proprietor there are a variety of options in obtaining financial support for their business, including loan facilities available from the U.