Sole trading concern (STC) is the oldest, simplest and most commonly used type of business organization which is handled by only a single person. In Sole trading concern (STC) a single person is owner, manager, controller, decision maker, motivator, supervisor and leader too.
According to Peterson and plowman, “A sole proprietorship is a business unit whose ownership and management are vested in one person. This individual assumes all risk and failure of the enterprise and receives all profits from its successful operation.”
In conclusion, Sole trading concern (STC) is that form of business which is started and operated by only one person who is responsible for all liabilities, losses and profits.
In Sole trading concern (STC), a single person invests all the required capital from his private property or by taking a loan from a financial organization. Sole trading concern (STC) means a sole man's ownership; a single person is owner, manager, controller, decision maker, motivator, supervisor and leader too.
The liability of the sole owner is unlimited. If a business organization bears losses and to pay dues, the sole owner must pay dues by using his/her own property.
A sole owner controls and manages the business by himself. He/She can take any decision regarding the business without consulting others. Nobody can pressure him and his management activities.
We know that, sole owner alone invests money, participates in management and control, so the sole owner should not have to share his profit and loss to others. He/She bears full risk and uncertainty and he or she does not have to share profit and loss.
We know that, business organization is surrounded by so much risk and uncertainty. Sole owners have to bear all the responsibility and risk of the business. Nobody takes the risk and uncertainty of business organization.
Business man or sole owner should not inform others about his/her business. All the plan and policy and financial activities remain secret. All the financial activities remain secret so there is secrecy in sole trading concern.
Sole trading concern has no separate legal entity. It is established and handled by the sole owner which is started from private registration act 2014 BS. The sole owner and business are the same, all the activities are done in the name of the sole owner.
Sole trading concern is handled or managed by a single person who can cover only a limited area, who can deal with limited product, have limited capital, limited managerial skills and time so the operation of business is limited.
In sole trading concern, life of sole trading concern depends upon the life of the sole owner. If the owner becomes insolvent, mad or dies the sole trading concern automatically closes, it has no legal formalities. There is no chance of existence of sole trading concern for the long term.
Sole trading concern can be easily established, there is no more formality and expenses in the establishment process
A sole owner can dissolve his/her sole trading concern at any time at his/her own interest. There are no more legal formalities to close.
The sole owner is the manager, proprietor, planner, decision maker of his organization. The decision made by him/her is the final decision. He/she must not consult with others. So, in sole trading concern prompt or quick decision is possible.
Secrecy is the most important factor for business success. because of a single ownership management and control, secrecy can be maintained in sole trading concern which helps to keep plan and policy secret.
Sole traders can change plans and policies of business organizations. It can be changed, expanded, reduced, modified as per the need and interest of the sole trader. It is not necessary to fulfill or to have legal formalities.
Sole owners can have loans easily from banks and from other persons. Sole owner is a single owner of sole trading concern so people get confident and provide loan to the sole owner.
We know that the sole trading concern is controlled and managed by the sole owner. Unnecessary expenses and additional expenditure are not done which helps to reduce expenditure so, the sole trading concern is economy.
All the profits which are earned by the sole trading concern are enjoyed by the sole owner, he has no need to share his profit to others. Cent percent profit is taken by the sole owner. It is the main advantage of sole trading concern.
The capital of sole trading concern is invested by only one person or sole owner either his own or borrowed money. He cannot manage more capital, due to lack of capital or fund sole trading concern loses so many opportunities.
In sole trading concern, the sole owner is a manager, planner, decision maker, investor, controller and so on. A single person has to do all the work but he/she may not be perfect in all activities. Due to the limited managerial skill all work done by the sole owner may not be right.
In sole trading concern, the sole owner has unlimited liabilities. He/she has to use his/her own private properties for the settlement of all dues. This is the main demerits of sole trading concern.
The life of sole trading concern is uncertain. sole trading concern may be legally closed if the sole owner dies, declared insolvent, declared mad/lunatic, punished by law. So, the sole trading concern has an uncertain duration of life.
Sole trading concern is a business which is handled by a sole owner only. If he.she becomes sick for a long time or goes on a visit or has some problems and is not able to attend his/her business organization which may cause great loss.
In sole trading concern prompt decision is taken for the further activities by sole owner while taking decision. Sole owners must not consult with others so there is a high possibility of making wrong decisions.
Due to limited capital, managerial skills, unlimited liability and uncertain duration of life, sole trading organizations have less or limited chance of expansion. It is the main demerits of sole trading concern.
All types of organization should be registered, sole trading concern should be registered under 2014 BS Act. The procedures of registration are:
Sole traders should visit concerned authority and fill registration forms properly either in the industrial or commercial department. The following points must be included.
After submitting the registration form, the sole owner has to deposit a fixed amount of money in tha account of the department prescribed by the government. The registration fee depends upon the capital which is invested in sole trading concern. Sole owners should also submit a voucher.
After submitting the application form with the required documents concerned, the authority checks all the information provided in the form. If all information is found correct, they issue the sole owner a certificate of registration.
For the legal validity, all the sole trading concerns must be registered in the department of business in the sixth months after the establishment of the concern. If the business organization is not registered, the government can fine and penalize the owner. If he/she did not register his business before the 4th penalty, it won't be registered and will be closed legally.
All the business organizations must be renewed at the end of fiscal year. Business organizations will be illegal if they are not renewed in time. In such cases, the government can fine them. If the sole owner does not renew business after the 4th fine at prescribed time by the government the concern authority can legally close the sole trading concern which won’t be registered again.