Top 10 Advantages of Sole Proprietorship form of Business.

The following are some advantages of sole proprietorship/sole trading concern over other forms of business organisations.:

1.     Easy formation: It is economical and easy to start its sole proprietorship form of Business. As it does not require any agreement or registration. A sole trader can start his operation just by opening a bank account and registering his firm with the sales tax and income tax authorities.

2.      Business secrecy: Business secrecy is a vital important to the success of any business organisation. Being a sole trader, he is not expected to share his trade secrets with anybody else. There is also no need for a him to disclose his account or any other material facts to the public.

3.      Flexibility: A sole proprietorship form of business is a highly flexible type of organisation. A sole trader can easily expand his business operations or can restrict them too. It is easy to incorporate chances in the activities of the business without much difficulty. He can also change the line of his business or can even close it down completely.

4.      Relationship with employees:  The functioning of a sole proprietorship is generally informal and the sole trader is in direct contact with each employee of his firm. This promotes better communication, develops understanding, reduces conflicts and develops harmonious relation between the sole trader and the employees. This also motivates the employees to work hard.

5.      Smooth running of business: Since, a sole trader, is able to establish a harmonious relationship with his employees, he can avail all possible help and cooperation from his employees. This helps him in smooth running of his business. Similarly, absence of interference from the government or external agencies also helps in smooth conducting of business.

6.      Quick decision and prompt action: The management of sole proprietorship is vested with the trader himself. He’s not required to discuss or seek advice from anyone while taking decision’s. This helps him to take quick decisions and prompt actions in all business matters like pricing, distribution, advertising, et cetera.

7.     Lower cost of Management: The business operations of sole trading organisation are mostly managed, supervised and controlled by the sole trader himself with the help of his Family members or relatives, and sometimes through paid staff. At the same time, small concerns are not constrained by the labour laws. This reduces the overall cost of managing the business operations.

8.     Effective control: In sole trading concern, all decision’s are centralised by the sole trader himself. Again, the scale of business is limited and restricted to the local areas. Thus, the sole trader himself, plan all the important activities and executes them. he also exercises strict control over the implementation of plans and takes corrective measures in case of deviations.

9.      Better coordination: The size of his sole trading concern being limited, a sole trader can easily coordinate the various operations of the business unit. This maintains the unity of purpose and direction in the organisation. At the same time, the sole trader can develop a high degree of group cohesiveness, by directly motivating and encouraging the employees and working with them.

10.   Encourages competition: There are a number of evils associated with the large and monopolistic organisations. On the other hand, sole trading organisations promote healthy competition. A large number of sole traders, dealing in the same community, are located in the same marketplace. This promotes competition, which ultimately benefits the consumer.