Chapter 4 forms of business ownership (Sole treading concern) Class 11 (HSEB/NEB)
Business is established to earn income by Serving
the concerned stakeholders under different legal ownership forms. The
organization set up conducting business activities is called the form of
business organization we have mentioned these forms;
1. Private
enterprises
a) Sole proprietorship
b) A partnership firms
c) Join stock company
d) Cooperative society
2.
Public
enterprises
3.
Joint
enterprises
1.
Private Enterprises:
Private Enterprises are forms of
business ownership that are owned and operated by individuals or groups of
individuals.
a) Sole Proprietorship: A business owned and operated by a
single individual.
b) Partnership Firms: A business owned by two or more
individuals who share profits,
losses, and responsibilities.
c) Joint Stock Company: A business owned by shareholders who
invest in the company by buying shares and have limited liability.
d) Cooperative Society: A business owned and operated by a
group of individuals who come together to meet their common economic needs.
2.
Public Enterprises: A business owned and controlled by the government to provide goods or
services for the benefit of the public.
3. Joint Enterprises: A business formed through a
partnership between two or more entities to collaborate and jointly undertake a
specific project or venture.
Introduction Of Soul Treading Concern
A sole proprietorship is a
business owned and operated by a single individual. The owner has full control
over the business, takes all the profits, and is personally responsible for any
debts or liabilities.
Feature / Characteristics of
Sole Treading Concern
- Sol ownership
- unlimited liabilities
- soul management and control
- risk bearing
- lack of legal existence
- maintains secrecy
- no sharing of profit or loss
- independent in decision making
- limited area of operation
1. Sole Ownership: The
business is owned and operated by a single individual, who has complete
ownership rights.
2. Unlimited Liabilities: The
owner is personally responsible for all the debts and obligations of the
business. They may have to use personal assets to settle business liabilities.
3. Sole Management and
Control: The owner has full authority and control over all
aspects of the business, including decision-making, operations, and management.
4. Risk Bearing:
The owner bears all the risks associated with the business, such as financial
losses, legal issues, and market uncertainties.
5. Lack of Legal Existence: The
business and the owner are not considered separate legal entities. They are
treated as the same, which means the owner is personally liable for the
business's actions and debts.
6. Maintains Secrecy: The
owner can maintain confidentiality regarding business operations, strategies,
and financial information as there are no legal requirements for public
disclosure.
7. No Sharing of Profit or
Loss: The owner enjoys all the profits earned by the business,
but they also bear all the losses. There are no partners or shareholders to
share the financial outcomes.
8. Independent in Decision
Making: The owner has the freedom to make decisions without
consulting others. They have the authority to determine the direction and
strategies of the business.
9. Limited Area of
Operation: Sole trading concerns typically operate within a
specific geographic area or market due to the limitations of resources and the
owner's capacity to manage and expand.
Reason for (advantages of)
starting soul trading concern
- Easy to establish
- Adequate secrecy
- Prompt decision
- Sole ownership of profit
- Close the relations with the customer
- Flexibility in operation
- Effective management and control
- Easy to dissolve
- Enhance social prestige
1. Easy to Establish:
Starting a sole trading concern is relatively simple and requires minimal legal
formalities, making it easier and faster to set up compared to other forms of
business.
2. Adequate Secrecy: As
the sole owner, you can maintain confidentiality about business operations,
strategies, and financial information, ensuring adequate secrecy.
3. Prompt Decision:
Being the sole decision-maker, you can make decisions quickly without having to
consult with partners or shareholders, enabling prompt decision-making.
4. Sole Ownership on Profit: You
enjoy full ownership of the profits earned by the business, providing you
with the opportunity to reap the rewards of your efforts and hard work.
5. Close Relations with
Customers: As the sole owner, you can build closer and more
personalized relationships with your customers, offering better customer
service and understanding their needs.
6. Flexibility in Operation: You
have the flexibility to adapt and change business operations quickly in
response to market demands, customer preferences, or emerging opportunities.
7. Effective Management and
Control: With sole management and control, you can efficiently
oversee all aspects of the business, ensuring effective management and
implementation of strategies.
8. Easy to Dissolve: If
you decide to close the business, it is relatively easy to dissolve a sole
trading concern without complicated legal procedures or formalities.
9. Enhance Social Prestige: Being
an independent entrepreneur and the sole owner of a business can enhance your
social prestige and recognition within the community.
Disadvantages of a sole trading concern
- Limited capital
- Unlimited liabilities
- Uncertain duration
- Limited public relation
- Impractical decision
- Difficult to obtain a loan
- Lack of specialization
- Limited opportunities for employees
1. Limited Capital: It
can be challenging for a sole proprietorship to raise significant amounts of
money for business expansion due to limited access to capital.
2. Unlimited Liabilities: The
owner is personally responsible for all the debts and liabilities of the
business, which can put their personal assets at risk.
3. Uncertain Duration: The
business's continuity relies solely on the owner, and it may cease to exist if
the owner decides to retire or faces unforeseen circumstances.
4. Limited Public Relations:
Compared to larger businesses, sole proprietorships may find it harder to
establish extensive connections and networks with the public.
5. Impractical
Decision-Making: The owner may face difficulties in making
well-informed decisions in all aspects of the business due to limited expertise
or resources.
6. Difficult to Obtain
Loans: Lenders may hesitate to provide loans to sole
proprietorships due to the perceived higher risk associated with personal
liabilities.
7. Lack of Specialization:
Sole proprietorships may struggle to achieve specialization in various areas of
the business due to limited resources and the owner's need to handle multiple
tasks.
8. Limited Opportunity for
Employees: Sole proprietorships may have fewer job opportunities
and limited benefits for employees compared to larger businesses.
Registration and renewal of sole trading concern
The Private Firm
Registration Act 2014 B.S. has provisions for the registration and renewal of sole
trading concerns in Nepal. It treats a sole trading concern as a private firm.
A sole trading concern must be registered before it can start a legal business in
Nepal. Only Nepali citizens can register a sole trading concern. If the sole
trading Concern is an industry, it should be registered with the Department of Industry. If the sole trading concern is an industry, then it should be
registered with the Department of Commerce. The Private Form Registration Act
2014 sets the following procedures for the registration of a sole trading
concern in Nepal:
Submission Of the Application
Form: An application should be
submitted in the prescribed form to the concerned government department. It
should include the following information:
1. Name and address of the sole trading
concern
2. Name and address of the owner, including
names of father and grandfather
3. Objective and nature of business.
4. Other information as required.
Attachments required
with the application are:
1. Copy of the citizenship certificate of
the owner.
2. Receipt of registration of the owner
b. Payment of
registration fee: Payment of the registration fee is another stage of firm registration.
Generally, the registration fee should be deposited in the Nepal Rastra Bank in
the account of the department. The bank voucher should be submitted to the
concerned department with the application form.
c. Open a registration
certificate: After necessary inquiries, the concerned department issues a certificate
of registration. It can refuse registration if the proposed
Registration seems inappropriate.
The certificate of registration authorized a sole trading concern to conduct
legal business in Nepal.
d. Registration in tax
office: After registering the
business the trading commission should register the business in the conscious
administration for the tax purpose.
Renewal of sole trading
concern: All the registered private firms must be renewed each year. The
application for renewal with the renewal fee should be submitted to the
conjoined department. The renewal of the firm must be done within 35 days of
the start of the new fiscal year. If the firm is not renewed within the
prescribed time, a fine of Rs 750 will be charged by the Nepal government. Prohibit
the export, import, and bank accounts of any non-registered and non-renewed
firm through notice.
Punishment
· The constant
department can impose a fine from ₹5 to 50 rupees on an owner of a soldering
concern operated without registration.
· If the owner
repeats the same offense three times, he/she shall be liable to an extra
₹10 fine for each time in the original fine imposed on her/him.
· If such
person committed the same act for the 4th time no private firms
shall be registered again in his/her name.
· ₹50 fine if he/she
submits any false information during registration of the sole trading concern.
Condition for the termination of the private firm
(sole Treading Concern)
· If the owner
of the firm submitted an application starting a reasonable reason
· If a form has
been registered by providing false details.
· When a firm cannot submit the details demanded by the concerned department.
· If the industry-related firm close itself.
· If a sole trading
firm commits any act against the law
Post a Comment