C. CHARACTERISTICS OF SOLE TRADING CONCERN

Sole proprietorship has certain distinct characteristics. They may be explained below:

(1) Single Ownership : One person own the whole business. The business is exclusively in the hands of that person. He provides the entire capital either from his private resources or by borrowings.

(2) One-Man Management and Control : A sole trader himself organizes, manages and controls the business according to his desire and capability. He may appoint employees to help him in business activities. However, the sole responsibility of management lies on him.

(3) Unlimited Liability : This types of business organization has the drawback of unlimited liability. Hence, creditors are entitled to have claim even on his private property.

(4) No Sharing of Profit and Loss : The proprietor has the sole right on the profit of the business. Similarly if there is loss he has to suffer alone. Hence, he puts his efforts to increase profits. The profit and loss of a business is not divided among others. In the words of Gerstenberg, “ He owns all risk all”.

(5) No Separate Entity : Legally the proprietor and business are not separate entities. Loss in business is his loss and liabilities of the business are his liabilities. Hence, law makes no distinction between the proprietor and business. They exist together.

(6) Limited Operations : Sole Trading Concern has limited resources and managerial skills. Hence, it has generally a limited area of operations.

(7) Freedom : A sole trader can start any legal business according to his choice and means. He can start and close the business at any time without any formalities. According to the change his business without any difficulty. He can easily expand, change or reduce his business. There is no restriction on it. However, he cannot start any business on which some legal restrictions are imposed.

(8) Personal Relation : A sole trader has always direct relations with his customers. He is able to attend to every aspects of and attention are established under this form of organization e.g. doctor’s clinic, retailer, etc.

Suitability of Business for Sole Trading Concern

Sole proprietorship is suitable for following types of business:

(1) Less Capital : Those business which requires less capital and less use of machinery.

(2) Artistic Materials : Ivory work, painting, embroidery work, etc. where personal attention is necessary.

(3) Personal Services : Tailoring, hair-cutting, photography, etc. where personal service is more important.

(4) Small Industries : Small industries in which small equipment are required.

(5) Less Risk : Those business which have less risk in relation to capital employed and work required.

(6) Local Market : Vegetables, milk, eggs, etc. which are perishable and have local demand only.

B. MEANING OF SOLE TRADING CONCERN

Sole Trading Concern is the form of business that is owned, managed and controlled by an individual. It is the oldest and most commonly used form of business organization. It is as old as civilization. Historically, it appears that business first started with this form of organization. This organization is also known as Sole proprietor, Individual proprietorship and Single entrepreneurship. The majority of this type of business is on small scale.

In sole trading concern an individual makes all the investments, bears all risks, takes all profits, manages and controls the business himself. He is known as sole trader or proprietor. It is the competence of the sole trader that determines the future of the business. His powers are unlimited and his decisions are final. He is the owner of all the profits but in case of loss he has to bear all losses. So his liability is unlimited and creditors are entitled to have claim even on his private property. Thus, a sole trader does not try to expand his business.

Some Definitions

Peterson and Plowman : “ As sole proprietorship is a business unit whose ownership and management are vested in one person. This individual assumes all risk of loss and failure of the enterprise and receives all profits from its successful operation”.

James Stephenson : “ A sole trader is a person who carries on business exclusively by and of himself. The leading feature of this kind of concern is that the individual assumes full responsibility for all the risks connected with the conduct of the business. He is not only the owner of the capital of the undertaking but usually the organizer and manager and takes all the profits or responsibility of losses”.

In Conclusion, a suitable definition can be given as follows:
Sole proprietorship is a form of business organization in which proprietor employs capital, uses his own skill and intelligence in the management of his affairs, undertakes the risk and responsibility, and receives all profits from the successful operation