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(a)Define sole proprietorship (b)state the features of sole proprietorship (c)Explain the formation of sole proprietorship (d)state the sources of capital of sole proprietorship (d)Explain the management of sole proprietorship

a)Define sole proprietorship
b)State the features of sole proprietorship
c)Explain the formation of sole proprietorship
d)State the sources of capital of sole proprietorship
e)Explain the management of sole proprietorship

Answers

a)SOLE PROPRIETORSHIP
This is a business enterprise owned by one person who is called a sole trader or a sole proprietor. It is the most common form of business unit and usually found in retail trade e.g. in small shops, kiosks, agriculture e.t.c and for direct services e.g. cobblers saloons e.t.c

b)Characteristics/Features
a)The business is owned by one person
b)The capital is contributed by the owner and is usually small. The main source is from his savings and other sources can be from friends, bank or getting an inheritance
c)The owner enjoys all the profits alone and also suffers the losses alone
d)The owner is personally responsible for the management of the business and sometimes he is assisted by members of his family or a few employees. He remains responsible for the success or failure of his/her business.
e)The sole proprietor has unlimited liability meaning that incase of failure to meet debts, his creditor can claim his personal property
f)There are very few legal requirements to start the business unit.
Sole proprietorship is flexible; it is very easy to change the location or the nature of business.

c)Formation
The formation of a sole proprietorship is very simple. Few legal formalities are required i.e. to start a sole proprietorship, one need only to raise the capital required and then apply for a trading license to operate the business small fee is paid and the trade license issued.

d)Sources of capital
The amount of capital required to start a sole proprietorship is small compared to other forms of business organizations. The main source of capital is the Owners savings. Additional capital may however be raised from the following;
Borrowing from friends, banks and other money lending institutions such as industries and commercial Development corporation(ICDC)and Kenya industrial estates
i)Inheritance
ii)Personal savings
iii)putting goods on credit
iv)Getting goods on hire purchase
V)leasing or renting out ones properties
vi)Donations from friends and relatives
vi)Ploughing back profit.

e) Management of sole proprietorship
The management of this kind of a business is under one person. The owner may however employ other people or get assistance from family members to run the business.
Some sole proprietorship may be big business organizations with several departments and quite a number of employees. However, the sole proprietor remains solely responsible for the success of failure of the business

Moraa orina answered the question on April 29, 2018 at 06:35

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(a)Define sole proprietorship (b)state the features of sole proprietorship (c)Explain the formation of sole proprietorship (d)state the sources of capital of sole proprietorship (d)Explain the management of sole proprietorship

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