SOLE PROPRIETORSHIP
Sole trade is the oldest of the forms of business organisation. It is a form of business which is owned, engaged and controlled by one person for the purpose of making profit.
Another name for sole trade is sole proprietorship or one – man business.
A man/woman who engages in sole trade is known as sole trader are shoe mender, law firms, kiosk owner, farmer, provision store etc.
Features of Sole Trade
- 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 Trade
- It is easy to run / establish
- It requires small capital to start
- There is freedom to run different types of business
- The owner enjoys the profit alone
- He/she controls the business alone
- He make 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 taking can lead to problem for the business
- The liability of the owner is unlimited
PARTNERSHIP BUSINESS
Partnership business is a business organisation that exists between two to twenty persons coming together to form business for the purpose of making profit.
It requires minimum of two and maximum of twenty but in banking services, two and ten as maximum.
SOURCES OF CAPITAL
- Partners contribution
- By admission of new member / partner
- By ploughing 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 partners agreement.
TYPES OF PARTNERS
- Active Partner: This is a partner that take 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 contribute 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 partner
- The amount of central required
- The nature of business to be transacted
- How profit or loss will be shared.
Partnership Dissolution – means putting this life of an existing partnership business to an end i.e. dissolving the business.
ADVANTAGES
- It has no more capital than 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 bigger organisation.
DISADVANTAGES
- There is 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 end to the business
See also:
IMPORTANCE OF ENTREPRENEURSHIP
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