Sole Trading Concern

The business organization is an institution which may be owned and controlled by single or a group of individuals to carry the certain business activities for earning a profit.The business organization is the combination of two words i.e Business and organization where business denotes an economic activity directed to earn profit through the production, distribution and exchange of goods.similarly, the organization refers to the act of bringing necessary resources for the production and distribution of goods and services and utilizing them in the best possible manner for achieving the objectives.

Business Organization and Sole Trading Concern

Concept of Business Organization

The business organization is an institution which may be owned and controlled by single or a group of individuals to carry the certain business activities for earning a profit. The business organization is the combination of two words i.e. Business and organization where business denotes an economic activity directed to earn profit through the production, distribution, and exchange of goods. Similarly, the organization refers to the act of bringing necessary resources for the production and distribution of goods and services and utilizing them in the best possible manner for achieving the objectives.

According to Wheeler, “Business organization is the concern, company or enterprises which buy and sells, is owned by one person or group of persons and is managed under a specific, set of operating policies."

According to A.N Agrawal, “Business organization is the act of bringing into effective cooperation the available resources for production and distribution of goods with a view to earning a profit."

It is clear from the above definition that a business organization is a system of bringing together the available resources like men, materials, money, and machines for the production and marketing of goods and services with the purpose of earning profits. A business organization can be classified into the following types:

• Sole Trading Concern
• Partnership
• Joint Stock Companies
• Co-operative organization
• Public Enterprises
• Multinational Companies

Sole Trading Concern

The business which is started, invested and managed by the single person is called sole trading concern. It is a one-man business. This form of business is one of the oldest forms of business organization. The person who starts and runs sole trading is called sole trader or sole proprietor.

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 enterprises and receives profit from its successful operation."

In conclusion, a sole trading concern is an enterprise which is invested, managed by a single person. In this business, sole-proprietor take all risk and responsibility of business. The profit of a business is also enjoyed by a single person. In this business, sole-proprietor take all risk and responsibility of business. The profit of a business is also enjoyed by a single person.

Registration of Sole Trading Concern in Nepal

In Nepal, there is no specific law regarding regulation of sole trading concern but it is guided by Private Firm Registration Act, 2014. According to Private Firm Registration Act 2014, a sole trading concern should be registered in the department of commerce and industry by providing the required documentation. A sole trading concern which is related to manufacturing must be registered in the department of industry whereas the sole trading concern related trade must be registered in the department of commerce. The procedure of registration and renewable of sole trading concern is explained below:

1. Filling an Application
2. Deposit of Fees
3. Certificate of Registration
4. Renewable of Sole Trading Concern

Filling an Application:

It is the first stage of sole trading concern registration. A sole trader who wants to register the business must fill up the application form provided by the concerned department. The applicant must provide the following information:

1. Name and address of the applicant
2. Name and address of the business
3. Nature and objective of business
4. Amount of Investment
5. Other details as prescribed by the concerned department

Along with this application, form applicant must provide a copy of citizenship certificates photo.

Deposit of Fees:

Once the application form is filled up, the applicant has to pay a registration charge as prescribed by the department. The registration fee will vary according to the amount of capital invested. The applicant is required to deposit the required registration fee amount at NR Bank in the name of the concerned department. According to private form registration act 2014, the registration fee of sole trading concern is as following:

Certificate of Registration:

After submitting the application form along with bank deposit slip, the department will verify all the information on it. The department will issue the certificate of registration if all information is satisfactory.

Renewable of a Sole Trading Concern:

A sole trading concern must be renewed within the 35 days of the beginning of every new financial year. A sole trader has to submit the application for renewable along with necessary documents and renewable fee. The following is the renewable schedule of renewable fee for sole trading concern.

Non-renewable of sole trading concern within the prescribed time, the extra amount of Rs 35 will be charged to the last date of Ashwin after the termination of Ashwin extra fine of rupees Rs 150 will be charged.

Characteristics of Sole Trading Concern

• Sole ownership or proprietorship
• Unlimited liabilities
• Sole management and control
• No legal existence
• Maintain Secrecy
• No sharing of profits/Loss
• Independent decision
• Limited area of operation
• Undivided risk and responsibility

1. Sole ownership or proprietorship:
   The sole trading concern is established and managed by a single person. The whole amount of investment is being made by a single person. The sole trader individually invests and earns the profit.
   
   
2. Unlimited liability:
   The liabilities of sole trading concern are unlimited. It means, in the case of loss of business the sole trader has to sell his/her personal property to pay a debt. Sole trading concern has liability which is not limited to the property of a business.
   
   
3. Sole management and control:
   In these form of business, owner and manager are same. The owner himself/herself is directly involved in business activities and manages the business affairs. The owner is also engaged in the control of the various activities of a business.
   
   
4. No legal existence:
   The sole trading concern is not required to register a company at the register office legally. In Nepal, it can be established in the department of commerce and industry. Therefore, it does not exist in the eye of law. The owners of the business are one and same.
   
   
5. Maintain Secrecy:
   In this business, it is very easy to maintain the secrecy of information. The information relating to business are not required to share with others. Therefore, this form of business has the highest level of information secrecy.
6. No sharing of profits:
   A sole trading concern is established and managed by the single person. Profit is not required to share with another. Sole trader individually enjoys the profit and bears the risk by himself.
   
   
7. Independent Decision:
   The sole trader can freely make the decision. He or she does not need to take consent of others while making the decision. Therefore, in this form of business decision making is fast.
   
   
8. Limited area of operation:
   Since the sole trading concern is invested by the single person, there is less scope for expansion and growth of it. Sole trader individually can't manage the big size of a business and he can't manage the big size of a business and he cannot invest for this as well.
9. Undivided risk and responsibility:
   In this business, risk and responsibility can be shared with another person. The sole trader individually takes all kinds of risk. A sole trader is personally responsible for accomplishing all activities of a business.

Advantages of Sole Trading Concern

• Easy to commence and dissolve
• Quick decision
• Secrecy
• Flexibility
• Personal supervision and control
• Direct motivation
• Easy to get the loan
• Economy
• Social benefits

1. Easy to commence and dissolve:
   A sole trading concern is owned, managed, controlled and invested by a single person so that it can easily establish and close it down whenever he/she wishes. There are limited and simple legal formalities to start and close the business.
   
   
2. Quick Decision:
   A sole trader can take business decisions by himself immediately according to his experiences and efficiency. He does not have to consult anybody to take decisions so that decision is quick and timely in sole trading concern.
   
   
3. Secrecy:
   Secrecy of business matter is key to achieve the goals. A sole proprietor is all-in-all of his business and he is also not required to publish any financial statements, he can tightly maintain business secrecy.
   
   
4. Flexibility:
   The sole trading concern is flexible. The owner has a greater degree of flexibility to run his business in sole trading concern. So, he can invest more capital and withdraw money or goods as per his necessity. Flexibility helps him to take benefits of the favorable situation.
   
   
5. Personal supervision and control:
   The sole traders act as both owner and manager, he can easily maintain and develop personal and business relations with all concerned parties like customers, suppliers, employees etc. which helps in the goodwill of the concern.
   
   
6. Direct Motivation:
   The efforts of sole trader and his reward have the direct relationship in the sole trading concern. The sole trader enjoys the total profits of the business alone. It directly motivates him for a hardworking and efficient management of a business.
   
   
7. Easy to get a loan:
   The sole trading concern is a one-man business organization. It is easy to start and close. A sole trader has personal relations with a large number of people. He can easily convince other people to provide a loan to him.
   
   
8. Economy:
   The owner is both manager and employee, so he/she can save some office and administrator expenses and attains economy operations of a business. Family members can also be used for the personal job in sole trading concern.
   
   
9. Social benefits:
   Sole trading concern has a number of social benefits. It gives employment to other people in society. The sole trader earns a better status in society. He can involve himself in social service, provide employment, give donations and sponsor to social functions. Hence, it provides benefits to society.

Disadvantages of Sole Trading Concern

• Limited capital
• Limited managerial ability
• Unlimited liability
• Loss in absence
• Uncertain life
• Limited scope for expansion
• Limited scope for opportunity

1. Limited capital:
   Its capital is limited due to the investment of a single owner. Such limited capital is insufficient for large-scale production and marketing of goods and services.
   
   
2. Limited managerial ability:
   It is managed by a single owner who may not have adequate managerial skills and technical abilities. So, it may face various managerial deficiencies.
   
   
3. Unlimited liability:
   The sole trader does not have limited liability to his business capital. The owner must pay the liability of his business even by selling his private properties if the assets of the business are not sufficient to meet such liabilities.
   
   
4. Loss in absence:
   It may come to close if the proprietor remains absent from his business due to his illness or other reasons. So, if the owner or proprietor is absent, the business may face the loss.
   
   
5. Uncertain life:
   Its life is closely connected with the life of the owner. So, it can be terminated any time due to death, lunacy, insolvency or disability of the owner.
   
   
6. Limited scope of expansion:
   It has a limited scope for expansion and development. Due to the limited amount of capital and managerial skills, its activities cannot be diversified.
   
   
7. Limited scope for opportunity:
   It offers limited opportunities to his employees. Due to the limited scope of expansion and development of business, its employees get limited opportunities for training, higher studies, career development, attractive salaries, and other benefits.