advantages
* easy formation there is no legal formalities for its formation and lso does not require a huge amount of capital. * quick decisions the sole trader being the supreme authority can take decisions independently without consulting others.
* better personal contact as it is small scale business, the owner can have personal contact with the customer as well as his employees. * flexibility if any change in the business is required he needs not consult with anyone. * less expensive management. the sole trader performs most of the work relating to his business. so expenses can be brought down to a minimum. * business secrets can be maintained.he can maintain secrets of his business because he need not disclose them to anyone. * no sharing of profit as it is one man business , he can enjoy the entire profit of the business.
disadvantages
* shortage of capital the capital resources of a sole trader are naturally limited. therefore expansion of the business is difficult. * unlimited liability the liability of the sole trader is unlimited or not limited to his capital contribution. that means his private properties are also liable for his business debts . * lack of continuity
the future of this kind of business is most uncertain. long illness, death, insolvency, insanity of the sole trader will surely disturb the business. * lack of management ability
the managerial ability of a sole trader is limited. he may not be master of all. * lack of economies of scale.because of limitation of finance and managerial ability, a sole trader operates on a small size. due to this , it does not enjoy the economies of large scale buying as well as increased sales
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The advantages and disadvantages of different forms of business ownership are of immense importance when it comes to choosing any one of them.
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