Characteristics of a Leader môn English | Trường Đại học Khoa học Tự nhiên, Đại học Quốc gia Thành phố Hồ Chí Minh

lOMoAR cPSD| 59994889
Characteristics: 1. Sole Ownership
A single person is an owner of this type of business. That person is responsible for
all the things relating to the business 2. Sole Management
The sole proprietor is himself responsible for the control and management of the
business. With the expansion of the business, the proprietor can organize staff for
his convenience, but ultimate control lies with him.
3. Sole Right on Capital
The arrangement of Capital to be invested in the sole trade has to be done by the
proprietor. Thus, he has full right on the capital.
4. Unlimited liability:
There will be hardly any difference between personal property and business
property of the entrepreneur. The proprietor is personally liable for all the debts of
the business. In case the assets are insufficient to meet its debts, the personal
property of the proprietor can be attached. 5. No legal entity:
A sole proprietorship has no legal identity separate from that of its owner. The law
makes no distinction between the proprietor and his business. The business and the
owner exist together. If the owner dies or becomes insolvent the business is
dissolved. Business and the proprietor are one and the same. 6. Small size: lOMoAR cPSD| 59994889
The scale of operations carried on by a sole proprietorship is generally small.
A sole trader can arrange limited funds and managerial ability. Therefore, the
area of operations is limited. Advantages: 1. No profit sharing:
The entrepreneur enjoys the entire profit earned in this form of business as there
are no other persons to share the profit. Being the owner, he enjoys all the benefits. 2. Motivation to work:
The proprietor alone is entitled to receive all the profits of business and he alone
has to bear all losses. There is a direct relationship between effort and reward.
Therefore, there is an incentive to work hard. The proprietor is motivated to make
the best possible use of his skills and resources to maximise profits. 3. Quick decisions:
The sole proprietor is completely free to take decisions and to implement
them. He need not consult others or seek their approval. Quick decisions
and prompt actions help to improve the efficiency of business operations.
4. Easy to start and dissolve
To start the business of the partnership or Joint Stock Company, some legal
formalities like registration, etc. is required, but the sole trader can commence
or close his business any time he wants. He need not fulfill any legal formalities for these. lOMoAR cPSD| 59994889 5. Flexibility
A sole proprietorship is small in size and has a simple management structure.
Therefore, it can be adapted easily to suit the changing conditions in the
market. The line of business can be easily changed or modified. 6. Economy:
The management of proprietorship is inexpensive. As the proprietor
himself is the manager, cost of management is very low. Borrowing
capacity is high due to the unlimited personal liability of the owner. Disadvantage 1. Individual risk:
The entire risk of the business is borne by the entrepreneurs as he or she is the
only owner of the business. All the risk is the sole responsibility of the owner.
Because of unlimited liability, the private property of the owner is at risk as it is
liable for business obligation in the event of business losses 2. Limited capital:
The financial resources of a proprietor are very limited. His funds are not
adequate enough to start large-scale operations.
3. Lack of specialization:
The managerial ability of the proprietor is limited. All the qualities such a
judgement, wisdom, etc. required for success in business are rarely found
in one person the proprietor is overburdened with too many tasks. lOMoAR cPSD| 59994889
He may commit errors of judgement and his decisions may be hasty. Sole
proprietorship cannot afford to employ professional experts. As a result,
the benefits of division of labour are not available.
4. Limited scope for expansion. Due to limitations of capital and
management, proprietorship business cannot grow and expand to a
large size. Its goodwill and bargaining position are also weak. Thus,
one man control is the best in the world provided the man is big enough
to manage everything. But such a man is not available. Therefore, sole
proprietorship is suitable only for small and simple businesses.