SOLE PROPRIETORSHIP
Sole trade is the oldest form of business organization. It is a form of business owned, engaged, and controlled by one person to make a profit.
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Another name for sole trade is sole proprietorship or one–man business. A man/woman who engages in sole trade is known as a sole trader are a shoe mender, a law firm, kiosk owner, a farmer, a provision store, etc.
Features of Sole Trader
- It is established to make profit
- It is easy to set up
- It gives room for quick decision making
Sources of Capital
- Personal savings i.e. contribution
- Loan from friends and relatives
- Loan from bank and government
Advantages of Sole Trader
- It is easy to run/establish
- It requires small capital to start
- There is the freedom to run different types of business
- The owner enjoys the profit alone
- He/she controls the business alone
- He makes a fast and quick decision
Disadvantages of Sole Trade
- The owner bears the risk alone
- He/she works for long hours
- The death of the owner may end the business
- Wrong decision-making can lead to problems for the business
- The liability of the owner is unlimited
PARTNERSHIP BUSINESS
A partnership business is a business organization that exists between two to twenty persons coming together to form a business to make a profit. It requires a minimum of two and a maximum of twenty but in banking services, two and ten as the maximum.
SOURCES OF CAPITAL
- Partners contribution
- By the admission of a new member/partner
- By plowing back profit to the business
- Loan from commercial banks
FEATURES OF PARTNERSHIP BUSINESS
- It is not a legal entity business
- The liability of partners is unlimited
- It is owned by two to twenty people
- Profit and loss are shared based on the partners’ agreement.
TYPES OF PARTNERS
- Active Partner: This is a partner that takes part in the running and management of the business.
- General Partner: This is a managing partner and has unlimited liability.
- Sleeping / Dormant Partner: This partner only contributes part of the capital and does not take part in the running of the business.
PARTNERSHIP DEED
This is a written agreement between the partners. It contains:
- The name of the company/firm
- The name of the partner
- The amount of central required
- The nature of the business to be transacted
- How profit or loss will be shared.
Partnership Dissolution – means putting the life of an existing partnership business to an end i.e. dissolving the business.
ADVANTAGES
- It has no more capital than a sole proprietorship
- The talent of individual partners can be developed
- Business account is not made published
- Better decisions are taken
- The partnership business can be developed into a bigger organization.
DISADVANTAGES
- There is a delay in decision-making because the partners are many
- Disagreement between partners may bring dissolution
- The liability of partners is unlimited
- The death of an active partner may put an end to the business
See also:
IMPORTANCE OF ENTREPRENEURSHIP