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.

Single ownership.

Self employment.

No sharing of profits and risks.

Exclusive managerial rights.

Free from Government regulations.

Unlimited liability.

Business is local.

Legal status.


The sole trading unit can be formed easily as it involves no fulfillment of legal formalities.


Ease of formation. Personal care.

Direct motivation.


Prompt decision.

Better co-ordination.


Secrecy can be maintained. Personality development is possible. Free from Government regulations. Creditworthiness. Benefit of self employment.


Limited capital.

Limited managerial skill. Uneconomic size.

Unlimited liability.

Limited supervision.

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.