Question

Give three merits of sole proprietorship firm.

Answer 1

MERITS OF SOLE PROPRIETORSHIP:

1. Sole benefits:

A sole trader enjoys all the profits generated by his business.

2. Minimal legal formalities:

There are minimal legal formalities required when forming the business. What is mostly required is a trading license which is offered at a small fee.

3. Secrecy:

A sole trader enjoys the top secrets of his business. These are normally the secrets that make his business successful and no one else can know it.

4. Personal contact:

It is easier for a sole trader to maintain closeness with his customers and employees. This is because employees and customers are few in number, hence, he is able to know them individually consequently attending to their problems.

5. Freedom of action:

A sole trade does not need to consult anyone when making decisions. This is so because he is the only and final decision maker. Decisions can be made quickly.

6. It is flexible:

Changes can be made within a short period and time.