Sole Trading Concern

Sole Trading Concern / Sole Proprietorship'Sole' means single and 'proprietorship' means ownership. Sole Trading Concern is the form of business that is owned, managed and controlled by an individual. In sole trading concern , an individual makes all the investments, bears all risks, takes all profits, manages and controls the business by himself. We go to the market to buy items of our daily needs. In the market we find a variety ofshops- some of them small and some of them big. We may find some persons sellingvegetables, peanuts, newspapers etc. on the roadside. We may also find cobblerrepairing shoes on the footpath. Everyday you come across such types of shops inyour locality. But have you ever tried to know how these businesses are run? Who arethe owners of these businesses? What exactly does an owner do for any business?You may say, the owner invests capital to start the business, takes all decisions relatingto business, looks after the day to day functioning of the business and finally, isresponsible for the profit or loss. Yes, you are right. The owner does exactly all thesethings. If you go a bit further, you will find that in some businesses a single individualand in some businesses a group of individuals perform all these activities. In this lessonlet us find out more about the business in which a single individual takes all initiatives tostart and run the business.1Glos and Baker write that "A sole proprietorship is a business owned by one person who is entitled to all of its profits,"Reed and Conover say "The single or the sole proprietorship is a business owned and controlled by one man even though he may have many other persons working for him."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. 2Barber's shops usually operate as sole traders

Plumbers operates in his Own

Simple Example Sole Trader Nepal

Characteristics of Sole Proprietorship Single Ownership No sharing of Profit and Loss The entire profit arising out of sole proprietorship business goes to the sole proprietor. If there is any loss it is also to be accepted by the sole proprietor alone.

One mans Capital The capital required by a sole proprietorship form of business organisation is totally arranged by the sole proprietor. From Where does he Bring The Capital? He provides it either from his personal resources or by borrowing from friends, relatives, banks or other financial institutions.

One-man ControlThe controlling power in a sole proprietorship business always remains with the owner. The owner or proprietor alone takes all the decisions to run the business. Of course, he is free to consult anybody as per his liking.

Unlimited LiabilityThe sole proprietor bearsunlimited liabilityfor any losses incurred by the businessIn case of loss the business assets along with the personal properties of the proprietor shall be used to pay the business liabilities.

Less Legal FormalitiesSole proprietorship form of business- requires almost(LITTLE) no legal formalities .Some does not require to be registered. Depending on the purpose of the business and depending on the nature of the business, the sole proprietorship has to have a seal. He may be required to obtain a licence from the local administration or from the health department of the government, whenever necessary.

Maintain Secrecy Sole Trading Concern can keep all its internal matters of its business secret !!Because of its Single Owner NatureAnd also`publish its book of account and any other progress report for the knowledge of general public.

Limited area of OperationSole trader has :-Limited ResourcesLimited Managerial AbilityLimited ManpowerLimited CapitalSO,,,,,,It is unable to expand its business activities in wide area and deal with various product line,AND LIMITED AREA OF OPERATION Advantages/ Merits/ Positive sides of Sole Proprietorship i. Easy to Form and Wind up ii. Direct MotivationThe profits earned belong to the sole proprietor alone and he bears the risk of losses as well. There is a direct link between effort and reward. So Direct Motivationiii. Quick Decision and Prompt Actioniv. Better ControlIn sole proprietorship business the proprietor has full control over each and every activity of the business. He is the planner as well as the organiser, who co-ordinates every activity in an efficient manner. v. Maintenance of Business Secrets vi. Close Personal Relation:-The sole proprietor is always in a position to maintain good personal contact with the customers and employees. vii. Flexibility in Operation:- The sole proprietor is free to change the nature and scope of business operations as and when required as per his decision. Suppose, as the owner of a bookshop, you have been selling books for school students. If you want to expand your business you can decide to sell stationery items like pen, pencil, register, etc. If you are running an STD booth, you can expand your business by installing a fax machine in your booth. Encourages Self-employment:-Sole proprietorship form of business organisation leads to creation of employment opportunities for people. Not only is the owner self-employed, sometimes he also creates job opportunities for others. Limitations/Disadvantage/Cons of Sole Proprietorship i. Limited Capital: ii. Unlimited Liability: iv. Limited Size:It is not always possible for a single person to supervise and manage the affairs of the business if it grows beyond a certain limit. iii. Lack of Continuity: May end with the death and Sickness of Ownerv. Lack of Managerial Expertise: A sole proprietor may not be an expert in every aspect of management. He/she may be an expert in administration, planning, etc., but may be poor in marketing. vi. Loss in Absence vii. Possibility of Wrong DecisionSole proprietorship form of business organisation is suitable: Where the market for the product is small and local. For example, selling grocery items, books, stationery, vegetables, etc. Where customers are given personal attention, according to their personal tastes and preferences. For example, making special type of furniture, designing garments, etc. Where the nature of business is simple. For example, grocery, garments business, telephone booth, etc. Where capital requirement is small and risk involvement is not heavy. For example, vegetables and fruits business, tea stall, etc. Where manual skill is required. For example, making jewellery, haircutting or tailoring, cycle or motorcycle repair shop, etc. Procedure of Registration In Nepal Sole Trading Concern is registered under the Private Firm Registration Act, 2014. Hence in Nepal, registration of Sole Trading Concern is compulsory. It is illegal to conduct any business without registration. If sole trading is related to commerce, then it should be registered in Department of Commerceand if it is related to industry, then it should be registered in Department of Industry of the Government. At present following procedure is applied for registration: (1) To Apply an Application The person wishing to register private firm should apply in the prescribed form in the concerned department. The application form contains the following particulars: Name of the private firm b. Address of the private firmc. Objectives of the firm and object of transactions and statement of work d. Name and address of the owner including the names of his father and grandfather e. Other particular as prescribed by Government. (2) To Deposit Registration Fees : Registration fee must be deposited in Nepal Rastra Bank or Any Authorized Bank and the voucher of it should be enclosed in the application. Fees depends upon the amount of capital invested in the business.Capital up to Rs.20,000 -Rs.160Capital from Rs.20,001up to Rs.50,000 -Rs.250 c. Capital from Rs.50,001up to Rs.1,00,000 -Rs.700 d. Capital from Rs.1,00,001up to Rs.3,00,000 -Rs.2,100 e. Capital from Rs.3,00,001up to Rs.5,00,000 -Rs.4,150 f. Capital from Rs.5,00,001up to Rs.10,00,000 -Rs.7,600 g. Capital from Rs.10,00,001up to Rs.50,00,000 -Rs.10,100 h. Capital more than Rs.50,00,001 -Rs.15,100 3) To Receive the Certificate of Registration Department will issue the Certificate of Registration. This certificate is the evidence of legal organization. Generally, Sole Trading concern Should Register Before Commencement of Business, But for Owners Convenience, can Register after 6 Month of its Establishment.

Procedure of Renewal All the registered firms should be renewal each year. For renewal application for renewal with renewal fee should be submitted to the concerned department A renewal fee of the private firm is charged according to capital. a. Capital up to Rs.50,000 - Rs.35 b. Capital from Rs.50,001 up to Rs.1,00,000 - Rs.100 c. Capital from Rs.1,00,001 up to Rs.3,00,000 - Rs.125 d. Capital from Rs.3,00,001 up to Rs.5,00,000 - Rs.150 e. Capital more than Rs.5,00,00 - Rs.200 The renewal of private firm must be done within 35 days of new fiscal year. If the firm is not renewed within the prescribed time a fine of Rs.35 will be charged up to the last date of Aswin and after that fine of Rs.150 will be charged. If the firm is not renewed

Government can prohibit the export-import transactions

and bank account of that firm through notice. Effect of Non-Registration In case private firm is operated without registration concerned department will charge a fine of Rs.5 up to Rs.50.If the same crime is committed up to 3 times the additional fine of Rs.10 will be imposed each time in the original fine. If he does fourth time, he can never register private firm under his name. Similarly the concerned department can fine private firm from Rs.25 to Rs.50 if the firm:- fails to notify the changed that take place within the prescribed time which are required by act or ifif false statement is submitted. If the firm is not registered of renewed according to Act, Government can prohibit the export import transactions and bank account of that firm through notice.