SOLE TRADE | Acadlly

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

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