SOLE PROPRIETORSHIP (FORM OF BUSINESS)

Sole proprietorship is a type of business that is wholly owned by one person. The business belongs to just one owner who has no partners or any other shareholder. The business owner is personally liable for the entire firm’s obligations, that is, the owner bears all the costs and keeps all the profits. The company may or may not be registered with regulatory authority that is, Corporate Affairs Commission (CAC).

Advantages of a Sole Proprietorship
· A sole proprietorship is a business that can be easily established.
· Capital requirement is small.
· Decision making process is quick.
· There are no strict regulations governing the establishment of a sole proprietorship.
· It is a form of business well-suited for small companies with informal business structure.
· All profits belong to the business owner.
· There is privacy in conducting business affairs.
· There is close relationship between owner and customers.

Disadvantages of a Sole Proprietorship
· One major disadvantage of sole proprietorship is that the owner is responsible for all the business’s debts and liabilities. If the assets of the business are not adequate to pay back the debts of the business, the personal belongings of a sole trader would be used in paying back such debts. 
· Problem of business continuity in the event of death of the business owner.
· Inadequacy of capital.
· Business expansion is limited to owner’s capital.
· Unregistered business name can not do business with government agencies and some well established companies.
· Inability to keep bank account in the name of an unregistered business name.
· Problem of business continuity in the event of death of the business owner.
· Inadequacy of capital.
· Business expansion is limited to owner’s capital.
· Unregistered business name can not do business with government agencies and some well established companies.
· Inability to keep bank account in the name of an unregistered business name.

Sources of capital of a sole proprietorship
The sole proprietor can obtain his capital from the following sources:
· Personal savings
· Loans from friends, cooperative societies etc
· Trade creditors
· Loans and overdrafts from banks
· Grants and loans from Government

Posted by: Monday Desmond