* Definition : -
“A sole trader is a person who trades on his own account
rather than in partnership or as a member of a company.”
* Meaning : -
Sole trading concern is the oldest form of commercial
organisation. Sole means one person. So a trading concern is an organization
where all business activities are controlled and managed by one man. He is also
solely responsible for the debt and risk of the firm. The following are some of
the features of a sole trading concern.
The sole trader is the oldest and most popular type of
business. It is a form of business where there is only one owner who manages
and controls the business.
A sole proprietorship, is a type of business entity which
legally has no separate existence from its owner. Hence, the limitations of
liability enjoyed by a corporation and limited liability partnerships do not
apply to sole proprietors. All debts of the business are debts of the owner. It
is a "sole" proprietor in the sense that the owner has no partners.
A sole proprietorship essentially means a person does
business in his or her own name and there is only one owner. A sole
proprietorship is not a corporation; it does not pay corporate taxes, but
rather the person who organized the business pays personal income taxes on the
profits made, making accounting much simpler. A sole proprietorship need not
worry about double taxation like a corporate entity would have to.
A sole proprietor may do business with a trade name other
than his or her legal name. In some jurisdictions, for example the United
States, the sole proprietor is required to register the trade name or
"Doing Business As" with a government agency. This also allows the
proprietor to open a business account with banking institutions.
Features of The Sole Trading Concern
1. Single ownership
2. Unlimited liability
3. Limited government control
4. Business secrecy
5. Flexibility
6. No sharing of profit and losses
7. No Legal status
THE ABOVE IMPORTANT FEATURES ARE EXPLAINED BRIEFLY DETAIL IN UNDER
1. Single ownership:
The sole trader is a single owner of
the organization. The sole trader owns all the assets and property of the
business. The sole trading concern is often referred (said) as “one man show”
2. Unlimited liability:
The liability of the sole trader is
unlimited. This means he is alone responsible for all the risks and debts of
the firm.
3. Minimum government control: -
Sole trading concern is less
affected by government control. This is because, there are almost no legal
formalities are required to start or close down a business.
4. Business secrecy:-
The sole trader can maintain complete
business secrecy. He needs not to publish any accounts and reports to any body.
Competitors cannot easily get business secrets and information of the sole
trader’s activities.
5. Flexibility:-
Sole trader enjoys maximum flexibility. He
can take right decision at the right time depending upon the situation. At any
time, he need not have to consult with anyone because he is a single owner of
his business.
6. No sharing of profit and losses:-
There is a direct
relationship between efforts and rewards. This results in best possible efforts
on the part of sole trader. Therefore, he can enjoy all the profits of his
business.
7. Legal status: -
Legally, the sole trader and his business
concern are one and the same in the eyes of law. The sole trader and his
business cannot be separated from each other. So the sole trader lacks legal
status.
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