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Third, the sole trader being entitled to the entire profits of the concern tries to maximize
profit by utilizing his talent and activities in the best possible way. The motivation of
efficiency in single entrepreneur organization is unchallenged.

Fourth, the sole trader can keep his business secrets entirely to himself. They cannot
be disclosed to his competitors or anybody else except by himself.

Fifth, the sole trader is able to create goodwill for his business and therefore, it is
easier for him to raise finance from the market. The liability of the sole trader being
unlimited, the creditors feel secure in extending credit to sole trader.
Sixth, all important decisions are taken by sole traders and hence there is no delay.
Had there been more than one person, decision making would be normally delayed.
Seventh, the Sole trader has direct communication with the consumers. Having
the first hand knowledge of consumer’s preferences and prejudices, he can make
necessary changes in the design and quality of products and their packing.
Eighth, the overhead cost of sole trader is the least of all business organizations and
hence his competitive strength improves in the right direction.
Ninth, the business of sole trader normally operates on a small scale and avoids
economic concentration and power in a few hands. Thus it does not create an economic
gap in society.

Disadvantages of sole trading

The form of business organization suffers from the following limitations which are
quite serious and which should be clearly borne in mind:

In the first place, the capital of a sole trading concern is usually small. It is limited to
the contribution of the proprietor and the credit he can get in the market. The modern
mammoth factories requiring crores of rupees cannot be ordinarily started by sole
traders.

Secondly, the limitations of managerial ability is as glaring as that of capital. Judgment
and wisdom which are individually possessed, of course, limited and may hamper
and increase in the scale of business.
Thirdly, the success of business depends upon the presence and personal abilities
of the proprietor. If circumstances make the absence inevitable, the business is
prejudicially affected.
Finally, the unlimited liability of the single proprietor is a great disadvantage to him.
Business debts run against his entire property not merely against the amount invested
in the business. This discourages the risk taking instinct of the entrepreneur.

Partnership Firm

When two or more individuals agree to carry on business for their mutual advantage
they are said to form partnership. A partnership is an association of two or more
persons to carry on business based on the agreement to share its profit and loss. This

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