Sole Trade

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.

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

1. It is established to make profit
2. It is easy to set up
3. It gives room for quick decision making

Sources of Capital

1. Personal savings i.e. contribution
2. Loan from friends and relatives
3. Loan from bank and government

Advantages of Sole Trader

1. It is easy to run/establish
2. It requires small capital to start
3. There is the freedom to run different types of business
4. The owner enjoys the profit alone
5. He/she controls the business alone
6. He makes a fast and quick decision

Disadvantages of Sole Trade

1. The owner bears the risk alone
2. He/she works for long hours
3. The death of the owner may end the business
4. Wrong decision-making can lead to problems for the business
5. 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

1. Partners contribution
2. By the admission of a new member/partner
3. By plowing back profit to the business
4. Loan from commercial banks

FEATURES OF PARTNERSHIP BUSINESS

1. It is not a legal entity business
2. The liability of partners is unlimited
3. It is owned by two to twenty people
4. Profit and loss are shared based on the partners’ agreement.

TYPES OF PARTNERS

1. Active Partner: This is a partner that takes part in the running and management of the business.
2. General Partner: This is a managing partner and has unlimited liability.
3. 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:

1. The name of the company/firm
2. The name of the partner
3. The amount of central required
4. The nature of the business to be transacted
5. 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

1. It has no more capital than a sole proprietorship
2. The talent of individual partners can be developed
3. Business account is not made published
4. Better decisions are taken

The partnership business can be developed into a bigger organization.

DISADVANTAGES

1. There is a delay in decision-making because the partners are many
2. Disagreement between partners may bring dissolution
3. The liability of partners is unlimited
4. The death of an active partner may put an end to the business