A sole trading concern is generally suitable for the following types of business.
a. Where capital needed is relatively less.
b. Where quick decisions can be taken.
c. Where the risk involved is-considerably less.
d. Where limited managerial ability is witnessed.
e. Where proximity with customers and workers is essential.
f. Where business can be controlled and managed by one man.
The sole trading type of business is well suited to those persons of small means with business skill and professional drive.
Points to remember
Meaning and Need:
The various forms of business organisations are formed to carry on industry and commercial activities.
The Chief forms are:
Sole proprietorship concerns
Joint Stock Companies
Joint Hindu Family Firms
Public utility concerns
Characteristics of an ideal form of Organisation
Ease of formation.
Ease of financing. Limited liability.
Direct relationship between ownership and control of management.
Flexibility in operations.
Continuity and Stability.
Maintenance of business secrecy.
Free from State regulation and control.
Minimum tax liability.
Meaning and nature:
The sole trading firm is the simplest and oldest form of organisation.
A sole trader is one who carries on business exclusively by or for himself.
No legal formalities.
No sharing of profits and risks.
Exclusive managerial rights.
Free from Government regulations.
Business is local.
The sole trading unit can be formed easily as it involves no fulfillment of legal formalities.
Ease of formation. Personal care.
Secrecy can be maintained. Personality development is possible. Free from Government regulations. Creditworthiness. Benefit of self employment.
Limited managerial skill. Uneconomic size.
Lack of consultations.
Lack of stability.
Lack of specialisation.
Risk of loss.
Applicability to different kinds of business:
The sole trading form of organisation is well suited for those with a little capital, skill and professional drive.
It is applicable to small trading firms and petty business.