Introduction To Business Lecture No 3

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SOLE PROPRIETORSHIP LECTURE # 3

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Out Line Legal Forms of Businesses Introduction to Sole Proprietorship Definitions Characteristics Advantages Disadvantages Scope of sole proprietorship One man control Suitability Suggestions To Promote Sole Proprietorship 12/12/08

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LEGAL FORMS OF BUSINESS Sole Proprietorship Partnership Company

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Introduction Simplest Form of Business Oldest Form of Business No Legal Requirements Single Trader

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DEFINITION

“Sole proprietorship form of business ownership in which the Business is owned and operated by one person”.

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CHARACTERISTICS Ownership Management & control Finance Risk • Ease of dissolution Unlimited liability No legal formalities Legal status Relationship with customers 12/12/08

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ADVANTAGES Ease of formation Sole authority Sole claim on profit Flexible and inexpensive management Credit standing Minimum legal restrictions Secrecy 12/12/08

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www.superior.edu.pk Cont……………..

Possible tax advantage Direct relationship with customers Power to start & close the business Benefit of inherited goodwill Reducing concentration of wealth Self employment Development of personal qualities Social benefits 12/12/08

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DISADVANTAGES Burden of unlimited liability Difficulties of expansion Limited managerial ability Absence in specialization Weak bargaining position Unsuitable for a developing business • Lack of continuity

• Loss in absence 12/12/08

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ONE MAN CONTROL IS BEST IN THE WORLD what is meant by one man control Statute of one man business

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Is one man control best in the world????... 12/12/08

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SUITABILITY • Where market is local. • When personal contract with customers is

required. • Where one likes being his own boss. • Where promptness is required in decision making. 12/12/08

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PREFERENCE OF SOLE PROPRIETORSHIP OVER OTHER FORMS OF BUSINESS ORGANIZATIONS

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SCOPE & FUTURE Ease of formation Promptness in decisionmaking Ownership of all profits Secrecy Low cost organization Credit rating 12/12/08

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Flexibility Personal satisfaction Ease of dissolution Personal touch 14

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SUGGESTIONS TO PROMOTE SOLE PROPRIETORSHIP LEGAL PROTECTION AVAILABILITY OF LOAN ADVISORY SERVICE INSURANCE OF BUSINESS TAX CONCESSION REBATE IN COST OF PRODUCTION 12/12/08

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