There
are many advantages/merits of sole proprietorship but some of facing advantages
in life are given below:
1}. EASE OF FORMATION:
A
person can undertake any lawful business activity for profit motive easily. The
person has to develop an idea, set the goals and then develop it into a
profitable operation.
According
to J.L. Lundy, becoming a sole proprietor is as simple as buying newspaper and
selling them in street. It is, therefore, attractive for its law start up cost.
2}. SOLE AUTHORITY:
The
sole proprietor has full authority to manage his business as he likes. He
prepares the plan, invests his money supervises the business and enjoys the
profit. He is the king of his business.
3}. SOLE CLAIM ON PROFIT:
The
sole trader receives full profits of the business. He also bears the full risk
of loss.
4}. FLEXIBLE AND INEXPENSIVE MANAGEMENT:
The
full authority rests with the single proprietor in this business. He can make
prompt decisions in carrying out policies, changing the method of production, reducing
or increasing the prices of the commodities, delegating responsibilities, etc.,
etc. He can also take quick action for increasing the production activities of
the workers by giving them incentives. The operational expenses are kept at the
minimum.
5}. CREDIT STANDING:
If
the proprietor has a sound goodwill and personal assets, he enjoys an excellent
credit rating among the creditors. He establishes his credit worthiness in the
market.
6}. MINIMUM LEGAL RESTRICTION:
As
long as the proposed business is legal, anyone can organize it without going
through any special formality.
7}. LEGAL STATUS:
 |
| advantages of sole proprietorship |
Legally,
the sole trader and his business are not separate from each other. The
proprietor and his business have one personality. All assets are his assets.
Loss in business is his loss. Liabilities of his business are his liabilities.
8}. SECRECY:
A
sole trader, being the organizer himself, maintains a high standard of secrecy
of profits, in technique of production, special formula, etc. etc.
9}. POSSIBLE TAX ADVANTAGES:
The
sole proprietorship’s profits are taxed as personal income of the owner. Thus a
sole proprietorship does not pay any special super tax or double tax.
10}. DIRECT RELATIONSHIP WITH CUSTOMERS:
A
sole trader is in close touch with his customers. He knows the tastes of his
customers and provides them the necessary goods which they need. This creates
his good will in the market.
11}. POWER TO START AND CLOSE THE BUSINESS:
The
sole trader can start any lawful business. He has also the right to close the
business as and when his likes.
12}. BENEFIT OF INHERITED GOODWILL:
The
ownership of sole trading business passes on from generation to generation. The
sole trader ship, thus enable the son to reap the benefits of goodwill of his
father.
13}. REDUCING CONCENTRATION OF WEALTH:
The
sole proprietorship helps in reducing concentration of wealth in a few hands.
It gives wider distribution of business ownership in the country.
14}. SELF EMPLOYMENT:
The
sole trading business provides business to a large number of persons with small
means.
15}. DEVELOPMENT OF PERSONAL QUALITIES:
In
sole trading business, the personal qualities of a proprietor like initiative,
self reliance have full scope for development.
16}. Social benefits:
Sole
proprietorship besides being useful to the individual owner, is also beneficial
for the society.
For
instance: 1) it makes an individual
financially independent who becomes an asset and not a burden to the
society.
2)
It develops social virtues like initiative, strong will, independent thinking,
courage to face odds in him.
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