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Class : 11
Unit : Business

Point out the characteristics of sole trading concern.

Ans : The characteristics of sole trading concern are presented below: i) Sole Ownership:- Sole trading concern is established by a single person investing his own capital. He manages business by utilizing his own resources and abilities. Other person or institution may invest money in the concern but they invest in terms of loan. ii) Sole management and control:- The sole trader has sole managerial authority of the concern. He has complete control over his business. He independently involves for buying and selling of goods and taking decision relating to the business himself. iii) Easy to establish:- Sole trading concern is easy to establish even with minimum capital and knowledge and simple to earn. After obtaining registration certificate from the concerned department of the government of Nepal, sole trade can perform formal business and can get facilities provides by the government. iv) Easy to dissolve:- It is simple to dissolve a sole trading concern. A sole trader can dissolve the business if he thinks the scope of economic gain from business is not possible. Only submission of an application in the concerned department of the government is sufficient. v) No sharing of profit or loss:- The sole proprietor invest capital, actively participate in management, and takes risk of uncertainty is n business. Therefore, he has sole ownership in the profit of the concern. Similarly, if sole trading concern is suffered loss he has to bear all the losses of the concern himself. vi) Unlimited liabilities:-The sole trading concern has unlimited liabilities in nature. On the basis of scope of business, sole proprietor can borrow loan from banks or other financial institution. There is no any limitation for borrowing loan to sole trading concern. vii) Maintain secrecy:- The maintenance of the secrecy is the one of the characteristics of sole trading concern. According to legal procedure, it is not bound to publish it’s internal matter such as book of account, future plans and other information for the knowledge of the general public. viii) Limited area of operation:- Sole trading concern has limited resources and managerial ability. It has limited capital manpower, materials and resources. Similarly, only sole proprietor involves actively in management and due to lack of time and skill, he is unable to expand business in many areas. ix) No legal existence:- A sole trading concern does not have separate legal entity. It cannot be separated from that of it’s proprietor. Since, it has no legal entity, it cannot perform any business in it’s own name. The legal procedure makes no difference between the sole trading concern and it’s owner. x) Flexibility in operation:- Sole proprietors has full control over his business. It can expand business to large scale on the basis of scope of economic gain. Similarly, he can minimize business volume if risk of loss is realized. It is necessary to fulfill government procedure to change business activities.