Form of Business Organization I

Individual Ownership (Sole Proprietorship)

This form of ownership is the oldest, simplest and most natural. In this type of ownership, the individual owner is the supreme judge in deciding all the matters pertaining to his business. He can employ whomsoever he likes. The entire responsibility of gaining profits or incurring losses is his own. This form of business requires less amount of capital and is easy to control. He can invest his capital to start business and enjoy the benefits of profits earned or suffer losses incurred from his business.

Advantages:

• No legal complications are involved in establishing this type of business.

• The owner is free to take all decisions regarding the operation of his business.

• He can enjoy the profits which he earns from his business.

• There is a great deal of motivation.

• The owner can maintain the secrets of his business.

• There is enough incentive to make it successful.

• He need not keep elaborate and complicated accounts.

•  In this form of organization, risk is unlimited.

• He can discontinue the business if he so desires.

• This type of business is flexible and can quickly adopt to changing conditions.

•  The proprietor can take great care to satisfy the tastes of his customers.

• This form of business is conductive to efficiency.

• The proprietor can work hard to achieve the targets.

• All kinds of wastages can be eliminated due to personal supervision.

• Quick decisions can be taken to meet rapid changes in the business operation.

• All changes in fashion can be adopted in production.

Disadvantages:

• He has to take all the risks personally in running the business.

• In case of failure of the business, the individual owner alone has to suffer the whole loss, which may at times be unlimited.

• The capital at his command is generally insufficient and this prevents expansion of the business. However, profitable it may be.

• This form of business is generally run on a small scale. It cannot enjoy the economies of large scale production arising from the use of specialized labour, machinery, large scale buying and selling, research and experimentation etc.

• It is difficult for one person to handle the business operations at the same time.

• No large scale business can be conducted in this form of organization.

• No country can achieve rapid industrialization, when the business is organized in such a primitive manner.

• In-spite of all these disadvantages of individual ownership, this form of business organization is not likely to disappear. It is specially useful for small scale firms. In agriculture, construction and in retail trade of all types, the individual ownership system is the best and prevails over all other types of organizations.