Sole Proprietorship: Discuss its Advantages

sole proprietorship

sole proprietorship

A person can undertake any lawful business activity for profit motive easily. The person has to develop an idea, set the goals and then develop it into a profitable operation. Sole proprietorship has many advantages in which some of them are as follow.

Sole Authority

The proprietor, being the sole authority, takes decisions of planning, organizing, staffing, coordinating, controlling and directing of the business unit.

Sole Claim on Profit

The proprietor is the sole owner of the profit of the firm and is also personally responsible for the losses.

Flexible and Inexpensive Management

The full authority rests with the single proprietor.  Therefore he can make prompt decisions in carrying out the policies, changing the methods of production, reducing or increasing the prices of the commodities, delegating responsibilities, etc. He can also take quick action for increasing the production activities of the workers by giving them incentives. The operational expenses are kept at the minimum.

Credit Standing

If the proprietor has a sound goodwill and personal assets, he enjoys an outstanding credit rating among the creditors.

Minimum Legal Restrictions

An individual enterprise is easy to form and simple to run as minimum legal restrictions are imposed on it. So a government gives preferential treatment in the establishment of small enterprise. Hence the single proprietors are not required to submit charter, partnership agreement, and special reports to the government.

Proprietor and Proprietorship are on

Legally the sole trader and his business are not separate from each other. So the business unit and the owner are one and the same. Loss in business is his loss. Liabilities of his business are his liabilities


A sole trader, being the organizer himself, sustain high standard of secrecy of profits, special technique of production, special formula, etc.

Management lies with the Owner

In sloe trader ship, management of the business lies with the owner. As the owner receives 100% of the profit earned in the business, he therefore, takes direct personal interest in increasing productivity and maximizing profit.

Direct Relationship with the Customers

A sole proprietor is in a position to retain personal links with his customers who are limited in number.

Power to start and Close the Business

The sole trader can start any lawful business without taking any advice from any one. He has also the right to close the business as and when he likes.

Benefit of Inherited Goodwill   

The ownership of sole trading business passes from one generation to another generation. Hence the sole trader ship thus allows the son to reap the profit of benevolence of his father.

Reducing Concentration of Wealth

The sole proprietorship helps in reducing concentration of wealth in a few hands. So it gives wider distribution of business ownership in the country.

Self Employment

The sole trading business offer business careers to a large number of persons with small means

Development of Personal Qualities

In sole trading business, the personal qualities of proprietor like initiative, self reliance have full scope for development.

Social Benefits

Sole proprietorship also being helpful to the individual owner, is also valuable for the society. For instance it makes an individual monetarily independent who becomes an plus point and not a weight to the society.  Hence it builds up social qualities like initiative, strong will, independent thinking, and courage to face odds in him