Classwork Series ad Exercises {Business Studies – JSS1}: Forms of Business Organization (Sole Proprietorship)

Business Studies, JSS 1, Week 5

Topic: Forms of Business Organization (Sole Proprietorship)

Contents:

1. Meaning of a sole proprietorship
2. Sources of Capital
3. Advantages of sole proprietorship
4. Disadvantages of sole proprietorship

Meaning of a Sole proprietorship

A Sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business.

The sole proprietorship is the oldest form of business units in Nigeria and in the world; it is a one man business which can be found everywhere, villages and town. It is a type of business unit that is managed by only one person with the aim of making profit.

Sources of capital for Sole proprietorship

The various means below are ways by which a sole proprietor can get finance for his/ her business

• Personal savings: this is the initial capital that the sole proprietor have saved for the purpose of starting a business
• Borrowing from friends and family: This is the means of going to friends and family for assistance to support the business.
• Loans from bank: This is going to either micro- finance bank or a commercial back to get loans in support of business. Loan is getting money and paying later with interest.
• Credit facilities from wholesalers or other distributors: this is receiving goods for sale from the manufacturers or wholesalers with the intention of paying the money later.

Advantages of Sole proprietorship

Sole proprietorship business has the following advantages

• A one man business is the easiest business to start
• It requires little or small capital to start up a sole proprietorship
• One man business encourages initiative and self interest
• The sole proprietor takes decision alone without consulting anybody, the decision making is fast
• The sole proprietor takes all the profit of the business alone
• The book of accounts of a one man business is kept private
• The sole proprietor is close to the customer workers and the customers, so he can understand them better and serve them better

Disadvantages of Sole proprietorship

• If the business fails, the sole proprietor bears all the risk ad losses alone
• The death of the sole proprietor may lead to the end of the business
• He works for long hours and has no time for holiday for fear of losing customers
• It is difficult to expand because of little or no capital

Test and Exercise

1. All the following are sources of capital for a sole proprietorship except (a) personal savings (b) stealing from banks (c) borrowings from friends and families (d) loans from banks
2. The aim of a sole proprietor is (a) to provide goods and services (b) to develop the economy (c) to make profit (d) to embezzle the consumers
3. One of the following is not an advantage of sole proprietorship (a) it encourages initiative and self interest (b) it is difficult to expand (c) he takes all the profit alone (d) decision making is fast
4. A sole proprietor is also referred to as (a) partnership (b) co-operative (c) sole trader (d) two traders
5. The death of the sole proprietor can bring the business to ———– (a) expansion (b) to an end (c) to continuity (d) all of the above https://passnownow.com/classwork-support/