Business Management Practices

1. FORMS OF BUSINESS
ORGANIZATIONS
 Sole Proprietorship
 Co-operative Societies
 Partnership firms Dr.Swathi.P
Assistant Professor
Kristu Jayanti College(Autonomous)
Bangalore

2. Sole
Proprietorship
 The sole proprietorship is the simplest business form
under which one can operate a business.
 The sole proprietorship is not a legal entity.
 It simply refers to a person who owns the business and
is personally responsible for its debts.
 A sole proprietorship, also known as the sole trader,
individual entrepreneurship or proprietorship, is a type
of enterprise that is owned and run by one person and in
which there is no legal distinction between the owner
and the business entity.

3. FEATURES
 Individual Ownership:
One person is the owner
 The entire capital either from his private resources or through
loans etc.
 Risk Bearing:
He alone has to bear it.
The risks of business are borne by the proprietor himself.

4.  Management and control:
The responsibility of the sole proprietor.
May employ a manager or other people for the purpose.
 Minimum Government Regulations:
Government does not interfere in the working.
They have to comply with the general laws and rules laid down by government.
 Unlimited Liability:
Bear the losses and is personally responsible for the liabilities of the business.

5.  Individual Financing:
Financing of such organizations are done by the individuals.
 Individual Accountability:
The managers and other employees of such organizations are accountable to the sole-
proprietor.
 Maintenance of Business Secrecy:
Secrecy can be maintained about business matters.
The proprietor will be able to take full advantage of any new ideas.

6.  Flexibility of Organization:
He does not have to consult anyone and is able to make the necessary changes without delay.
 No Sharing of Profits or Losses:
He alone gets all the profits and bears all the losses of the proprietary firm.

7. ADVANTAGES
 Easy to Form:
Formed easily and quickly.
Very few legal formalities need to be fulfilled.
No need to go for any registration or enter into an
agreement with someone.
 Owner’s Freedom to Take Decisions:
Free to make all decisions and reap all the fruits of his
labour.
No other person can interfere or weigh him down.

8.  Full Control:
Answerable to no one else.
He decides everything in the best interests of the business.
Freedom to think and act independently that gives the maximum amount of satisfaction to
the owner.
4. Quick Decisions:
Proprietors can take quick steps and dispose of things promptly.
No need to consult someone.

9.  Economical and Efficient Operations:
The owner can put together his sources to the best use.
Can take steps to eliminate wastage of all kinds.
The threat of losing his grip over his business and being pushed to a corner by
rivals keeps him vigilant, alert and cautious.
 Personal Touch:
The owner can bring his skills, knowledge, and expertise to the table.
He can play with his ideas and get them going.
 He can convert his dreams into concrete realities.

10.  Keep the Business Simple, Dynamic and Flexible:
He can run the business in sync with changing customers’ tastes and preferences.
 Keep the Secrets Close to Heart:
Secrecy is another major advantage offered by proprietorship.
The whole business is handled by the proprietor himself and, as such, the business
secrets are known to him only.

11.  Tax Advantage:
The proprietorship form of ownership enjoys certain tax advantages.
A proprietor’s income is taxed only once while corporate income is, at occasions taxed twice, say,
double taxation.
 Easy Dissolution:
No scope for the difference of opinion in the case the proprietor/entrepreneur-wants to dissolve
the business.

12. DISADVANTAGES
Unlimited liability:
Any debts or damages incurred by
the business are his (her) debts and
he must pay them, and, if necessary,
by selling his home, car, or everything
else he owns.
The risk of going totally bankrupt.

13.  Limited Financial Resources:
Ability to acquire capital for expansion is limited.
He can borrow on his own security.
 Management Problems:
A business can be efficiently run by professional managers.
Sole proprietors cannot afford to employ qualified employees at high salaries
and various fringe benefits to run their businesses efficiently.

14.  Huge Time Commitment:
Sole proprietors have little time to do anything else in life due
overwhelming time commitment.
There is no one with him to share the work load.
 Few Fringe Benefits:
The sole owner of a firm loses the fringe benefits which often come with
working for others.
There is no medical benefit, no pension, no terminal benefits (such as
provident fund and gratuity), no leave travel concession and no house rent
allowance.
Constant pressure to save money for personal profit and security.

15.  Limited Growth:
Expansion of a single-owner firm is slow and sporadic (not spontaneous).
Firm relies on its owner for most of its creativity, business know-how and funding.
 Limited Life Span:
If the sole proprietor dies, becomes physically unfit, or retires the business ceases to exist.
 Lack of Specialization:
One person performs all the functions which are essential for the successful conduct of a
business the benefits of specialization cannot be derived.

16.  Decision-Making Errors:
The sole trader takes all business decisions without consulting others, there is, at times, excessive
pressure on him and may commit decision-making errors.
 Loss of Potential Economies of Large Scale:
A sole trader operates on a small scale, he fails to derive the advantages of large-scale production in
various areas of business such as making bulk purchase of raw materials, selling goods in different
markets (both domestic and foreign).
 In such a business there is loss of potential economies of scale.
 Uncertain Future:
The future of a sole trader is uncertain.
The life of a proprietary enterprise depends solely upon the life of the proprietor.

17. Registration
 Although sole proprietor doesn’t require any specific
registrations, he is advised to obtain a few
registrations to make his business function smoothly.
 Registering as SME (Small & Medium sized
enterprises)
 Shop and Establishment Act License
 GST Registration
 To register a sole Proprietorship, the following
documents are required:
Aadhar Card PAN Card
Bank Account Registered office proof