Question

Answer the following question:

State the features of sole trading concern.

Answer 1

A Sole Trading Concern is one of the oldest forms of business organization. It is maintained, owned, controlled only by one person and so it is also called as “One Man Business.” The person who conducts such business is known as “Sole Trader”.
The features of sole trading are explained as follows:
(1) Minimum Government regulations: A sole proprietor is free from complicated government rules and regulations. There is no Special law to register and control the working of sole proprietorships. There are no complicated legal formalities to be followed for setting up a concern or for closing down the business. However, it has to observe general law and taxation law of the country.
(2) Single ownership: The entire business of a sole trading concern is owned by one person, viz. the proprietor. He may appoint the manager, accountant, superintendent, etc. but they cannot share profit or loss and the ownership of his business.
(3) One-man’s capital: The capital required for the business is entirely raised by the sole proprietor himself. It may consist of his own personal savings or borrowings from his friends, relatives or financial institutions.
(4) No sharing of profits and risks: A sole trader being the single owner of his business does not have to share the profits or losses with anybody else. In the case of profit, it is fully enjoyed by the sole trader and in the case of loss; it is fully borne by the sole trader himself.
(5) Decisions: The sole trader can take any decision he likes and he can also take any action as per his desire. He is the ultimate and final decision-making authority having full control over his business.
(6) Secrecy: A sole trader is not required to publish annual accounts. Similarly, he takes decisions individually and independently. Thus complete business secrecy is maintained in this form of organisation.
(7) Unlimited liability: As the sole trader and his business are one and the same. The liabilities of his business become his liabilities. It means that if the assets of his business are not enough to pay off the business liabilities, the sole trader will have to pay the same out of his other personal and private property. In other words, the liability of a sole trader is unlimited.
(8) Legal status: A sole trading concern has no separate legal status distinct from its owner (sole trader). In other words, legally there is no distinction between the sole trader as an individual and his business. The sole trader and his business are one and the same in the eyes of the law. Because of this, the death of the sole trader brings an end to the organisation.