E. REGISTRATION AND RENEWAL OF SOLE TRADING CONCERN IN NEPAL

In Nepal, any person desiring to conduct Sole Trading Concern should be registered under "Private firm Registration Act, 2014". According to the Act, "Private firm means any firm or company concluded by one person privately or any name doing business in industry; business of export imports trade". Hence, the act incorporates all one person's private firm, which conducts industry or business.

According to the “Private Firm Registration Act, 2014” , clause 3, “After the commencement of this Act, no one can operate private firm without registering under this act”. Hence in Nepal, registration of Sole Trading Concern is compulsory. It is illegal to conduct any business without registration. If sole trading is related to commerce, then it should be registered in Department of Commerce and if it is related to industry, then it should be registered in Department of Industry of the Government.

Procedure of Registration

In Nepal “Sole Trading Concern” is registered under the “Private Firm Registration Act, 2014”. At present following procedure is applied for registration:

(1) To Apply an Application : The person wishing to register private firm should apply in the prescribed form in the concerned department. The application form contains the following particulars:
a. Name of the private firm
b. Address of the private firm
c. Objectives of the firm and object of transactions and statement of work
d. Name and address of the owner including the names of his father and grandfather
e. Other particular as prescribed by Government.

The application form should be attested by one gazetted Government officer. An application fee of Rs.5, attested citizenship, and registration fees must accompany the application.

(2) To Deposit Registration Fees : Registration fee must be deposited in Nepal Rastra Bank and the voucher of it should be enclosed in the application. The amount of registration fees depends upon the amount of capital invested in the business. The registration fees will be in accordance with the notice published by the Government on Nepal Gazette. The registration fees according to capital invested are as follows:

a. Capital up to Rs.20,000 -Rs.60
b. Capital from Rs.20,001up to Rs.50,000 -Rs.120
c. Capital from Rs.50,001up to Rs.1,00,000 -Rs.300
d. Capital from Rs.1,00,001up to Rs.3,00,000 -Rs.1,170
e. Capital from Rs.3,00,001up to Rs.5,00,000 -Rs.1,950
f. Capital from Rs.5,00,001up to Rs.10,00,000 -Rs.3,950
g. Capital from Rs.10,00,001up to Rs.50,00,000 -Rs.850
h. Capital more than Rs.50,00,001 -Rs.7,850



(3) To Receive the Certificate of Registration : When the concerned department receives the application for registration authorized officer of the concerned department will examine and scrutinize the particulars of the application. If the concerned department is satisfied with the application, the firm will be registered. Then the Department will issue the “Certificate of Registration”. This certificate is the evidence if legal reorganization.

Procedure of Renewal

All the registered firms should be renewal each year. For renewal application for renewal with renewal fee should be submitted to the concerned department. A renewal fee of the private firm is charged according to capital. The current rates of renewal fees are as follows:
a. Capital up to Rs.50,000 - Rs.35
b. Capital from Rs.50,001 up to Rs.1,00,000 - Rs.50
c. Capital from Rs.1,00,001 up to Rs.3,00,000 - Rs.70
d. Capital from Rs.3,00,001 up to Rs.5,00,000 - Rs.100
e. Capital more than Rs.5,00,001 - Rs.160

The renewal of private firm must be done within 35 days of new fiscal year. If the firm is not renewed within the prescribed time a fine of Rs.35 will be charged up to the last date of Aswin and after that fine of Rs.150 will be charged. If the firm is not renewed Government can prohibit the export-import transactions and bank account of that firm through notice.

Effect of Non-Registration

In case private firm is operated without registration then concerned department will charge a fine of Rs.5 up to Rs.50. If the same crime is committed up to 3 times the additional fine of Rs.10 will be imposed each time in the original fine. If he does fourth time, he can never register private firm under his name. Similarly the concerned department can fine private firm from Rs.25 to Rs.50 if the firm fails to notify the changed that take place within the prescribed time which are required by act or if false statement is submitted. If the firm is not registered of renewed according to Act, Government can prohibit the export import transactions and bank account of that firm through notice.

Disadvantage of Sole Trading Concern

The disadvantage of sole trading concern are as follows :

(1) Limited Capital : The capital of one proprietor is usually small. It is limited to his personal savings and borrowing on personal security. Hence, he cannot undertake further expansion and development lack of excess capital and fails to enjoy the internal and external economics of scale.

(2) Limited Management Ability : In the present competitive world complexities of managerial jobs are increasing everyday. One man cannot be expert in each and every function of the business. For lack of resources he may not be able to use the services of experts. So limited managerial ability will hinder the growth of the firm.

(3) Unlimited Liability : The unlimited liability of sole proprietorship is a great disadvantage. A loss in business may deprive the proprietor of his assets too. So big business firms requiring more economic risk are not established under this organization.

(4) Uncertain Life : The success of this type of business depends on the personal capacity of proprietor. In case of his death business may be discontinued. The successors may not have the same degree of self-reliance and ability. Thus, there is no continuous existence of the firm.

(5) Dull and Monotonous Work : The proprietor has the sole right on profit of the business. So he tries to work more to earn more profit. Consequently the work becomes dull and monotonous. His health is badly affected and he is deprived of pleasant social relations and cordial family life.

(6) No Large Economics and Specialization : A small scale business cannot economies in purchases, production and marketing. Similarly the benefit of specialization of service of experts cannot be obtained.

(7) Loss in Absence : A sole trading has to suffer from the long illness of the proprietor. In his absence business comes to a standstill. This can lead to heavy losses. Employees may not be efficient or they may not take sincere interest.

(8) Possibility of Wrong Decision : In sole trading a businessman alone makes all the decisions. Hence, decisions may not be always right and wise. When a considerable number of people are involved in decision making process a wise and mature decision is possible.

Advantages of Sole Trading Concern

The advantages of Sole trading concern are as follows:

(1) Easy of Establish : Sole trading concern can be established very quickly and easily. Anybody who wants to start a business can do so, whenever, he likes. In Nepal, only nominal legal formality of registration is necessary.

(2) Easy to Dissolve : Dissolution of sole trading concern equally simple. There are no legal formalities in this regard. Proprietor can dissolve business whenever he likes to do so.

(3) Effective Control : In this form of business organization proprietor is responsible for all types of activities. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way. He controls all functions and takes decisions at appropriate time. So, the business is controlled in an effective way.

(4) Direct Motivation : The direct relationship between effort and reward serves as a powerful incentive to the proprietor to manage the concern efficiently. The proprietor being entitled to the entire profits of the concern tries to maximize profits by utilizing his talents and activities in the best possible way.

(5) Personal Supervision : The proprietor is able to supervise every work of the business himself. This helps to build up a close and cordial relationship with the employees. He can take personal interest in his customers and he can meet their individual and typical needs easily and adequately. It ensures effectively and economy in the operation.

(6) Benefit of Unlimited Liability : The proprietor can obtain loan on his personal credit. The liability being unlimited, the creditors feel secure in extending credit.

(7) Prompt Decision : The owner has full control over his business. So he is able to take decision promptly without consulting anybody. If more than one person is involved in decision making then delay is bound to occur.

(8) Secrecy : The proprietor can maintain business secrets. There is no legal regulation regarding the disclosure of business information. So he can maintain secrecy from his competitors. Secrecy is very vital for business success.

(9) Flexible : Sole trader enjoys the maximum flexibility in his business. If any change in business is required, he does no have to consult any one and can make the change without delay. No legal formalities are required for making changes in operations. This gives flexibility to this type of business.

(10) Social Importance : From social viewpoint sole trading concern is important because: (a) It is a means for earning livelihood independently. (b) It avoids concentrating wealth in few hands. (c) It brings competition among sole proprietors, so they provide goods in cheaper rates to the society. (d) Qualities like self-reliance, self-confidence, tact and initiative are developed in this organization.