Class 11 - Business Studies - Forms Of Business Organisation - Sole-Proprietorship - Study Notes (#class11BusinessStudies)(#eduvictors)(#cbsenotes)

Forms Of Business Organisation -
Sole-Proprietorship

Class 11 - Business Studies - Study Notes

Sole proprietor means a form organization in which there is the only owner at business. He himself manages and is the only receipt of all profits and losses (risks).

Features of Sole-Proprietorship:

① Single ownership:
He is the sole owner of all the assets and resources of the business.

② No separate Legal Entity: 
The Business has no separate existence or entity that of the business. All the assets and liabilities of the business are that of the businessman.

③ No Legal Formalities: 
No Legal Formalities are required to start. manage and dissolve such business organization.



④ Control and management:
Sole proprietor has full power to control and manage such organizations.

⑤ Unlimited liability:
The liability of the owner is unlimited. In case, the assets of a business are not sufficient to meet its
debts, the personal property 01 owner can be used for paying debts.

⑥ Undivided Risk :
 Means the owner bears all the losses and enjoys all the gains.

⑦ Suitable for some special form of business: 
It is suitable in areas at personalized services and small scale activities like agriculture, the job of stitching, bakery, beauty parlour etc.

⑧ Secrecy: 
All the important information concerning the business rests only with the owner so that no outside party can take any under the advantage of It.

⑨ Free from Government control:
A sole proprietorship is the least regulated form of business. Regulated laws are almost negligible in its formation, day-to-day operation and dissolution. Disadvantages of Sole Proprietor Form of Business


Merits of Sole Proprietor Form of Business: 

1. Easy formation:
The formation of a sole proprietorship enterprise is very smooth and simple. No criminal formalities are concerned for putting in the enterprise except a license or permission in sure cases. The entrepreneur with initiative and a positive amount of capital can installation such shape of commercial enterprise.

2. Direct motivation: 
The entrepreneur owns all and risks all. The entire profit goes to his pocket. This motivates the proprietor to put his heart and soul in the business to earn more profit. Thus, the direct relationship between effort and reward motivates the entrepreneur to manage the business more efficiently and effectively.

3. Better control: 
The entrepreneur takes all decisions affecting the business. He chalks out the plan and executes the same. His eyes are on everything and everybody. There is not any scope for laxity. This effects in higher manipulate of the commercial enterprise and in the long run end in performance.

4. Promptness in decision-making: 
When the selection is to be taken with the aid of one character, it is positive to be quick. Thus, the entrepreneur as a sole proprietor can arrive at brief decisions concerning the business by using which he can take the gain of any higher opportunities.

5. Secrecy: 
Each and each component of the commercial enterprise is taken care of by using the proprietor and the enterprise secrets and techniques are regarded to him most effective. He has no legal duty to publish his debts. Thus, the upkeep of adequate secrecy leaves no scope to his competition to be aware of the business secrets and techniques.

☛ The business of everybody is the business of nobody.

6 Flexibility in operations: 
The sole proprietorship business is undertaken on a small scale. If any change is required in business operations, it is easy and quick to bring the changes.

7. Scope for private contact: 
There is scope for non-public courting with the entrepreneur and customers in sole proprietorship commercial enterprise. Since the dimensions of operations is small and the employees' paintings underneath his direct supervision, the proprietor maintains a harmonious relationship with the personnel. Similarly, the proprietor can recognise the tastes, likes and dislikes of the customers because of his personal rapport with the customers.

8. Free from Government control:
A sole proprietorship is the least regulated form of enterprise. Regulated laws hints are almost negligible in its formation, each day operation and dissolution.


Demerits 

1) Limited financial resources: 
Funds are limited to the owner's personal savings (Less capital) and ms borrowing capacity

2) Limited managerial ability: 
A sole trader can't be good in all aspects of business and he can't afford to employ experts
also.

3) Unlimited liability: 
As the sole trader has to face the entire risk of business, so he compels him to avoid risky and bold decisions.

4) Uncertainty:
Death, insolvency, lunacy or illness of a proprietor may lead to its closure.


5) Limited scope for expansion: 
Due to limited capital and managerial skills, it can't expand to a large scale.


6) Difficult to maintain personal contact: 
Even though there is scope for a personal touch in sole proprietorship business, it is not so easy on the part of the proprietor to have personal contact with all customers and suppliers at the same time due to lack of big infrastructure.


☛See also:
Ch1: Nature and Purpose of Business (MCQs)
Ch1: Characteristics of Business
Ch1: Business vs Profession vs Employment
Ch1: Nature and Purpose of Business - Classification Of Commerce
Ch2: Forms of Business Organization
Ch3: Private Public and Global Enterprises (Q & A)
Ch4: Business Services (Introduction)
Ch4: Banks and Functions Of Commercial Banks
Ch4: Insurance Services
Ch10: International Business-I (NCERT Answers)