Advantages Of Sole Proprietorship

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Advantages of Sole Proprietorship

(i)    Ease of Formation. The establishment of a sole tradership concern is easier as compared to other forms of organization. A person with small amount of capital cans stat the business without undergoing much legal formalities. Procurement of license may be a necessity to deal in particular commodities like drugs, liquor, foodgrains, etc.

(ii)    Flexibility. The sole trader is free to change the nature and scope of his business operations, whenever the situation demands. The flexibility is available because the sole trader is the sole owner of the business.

(iii)    Quick Decisions. Sole proprietorship concern facilities quick decision making and prompt action. Exclusive control and direction of the proprietor result in increased efficiency, production of quality products and reductions of costs. Since the owner is the ‘supreme judge’ in all matters pertaining to his business, he can take quick decisions and implement them without any delay.

(iv)    Secrecy. It is easy to preserve secrecy in business. The important clues of business developed by the sole trader by his fact, foresight and skill can be kept as a closely guarded secret. In this form, there is also no need to disclose accounts or any other material fact tot eh public.

(v)    Personal Touch. A sole trader can maintain intimate personal contacts with his customers. Direct contacts will enable the proprietor to know the nature of his customers and their tastes, likes and dislikes. Close personal touch with the customers enhances the reputation of the firm.

(vi)    Direct Motivation. In this form of business organization, the proprietor takes all the profits and bears all the risk and losses. Thus, there is a direct relationship between effort and reward. This will motivate the owner of the business to work hard to achieve maximum efficiency and effectiveness of the business.

(vii)    Independent Way of Life. Sole proprietorship offers an independent way of life for people who have necessary skills, but do not wish to serve others. This provides an excellent opportunity of self-employment to persons of small means with personal skills.

(viii)    Overhead Costs. The overhead costs of management are less as compared to other forms of business enterprises. Since the sole trader himself manages the business, he can achieve greater economy in the business operations.

(ix)    Minimum Government Regulations. The sole tradership firm is subject to the minimum control of Government regulations. The sole trader has to comply with income tax, sales tax and labour laws. He is not subject to special legislations as in case of companies and partnership firms. There is no need of registration of filling of returns. Moreover, dissolution of the firm is also very easy.

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