Due to various benefits, sole trade is the foremost outlay of business, because, in sole trading, the business is run by a single individual who takes care of his business, establishes its secrecy and his/her quick decision-making capacity can help in increasing the proficiency of the business. It is only possible when the trader is very skilled and the size of the business is small. There are very skilled persons present nowadays.
That is why the business of big level having more challenge is not possible to be run by a single individual. Therefore, the quote by Prof. William K. Was that “Sole trading is the most proficient business if the trader can take control of everything all by himself” is true till certain limits only. For the lower-level business, that requires less investment and that can be run by a lesser skilled person, this statement is also true, but this statement also has some limitations for that it cannot be a choice of formation for every type of business.
The limitations are:
1. Small Size –
The sole trading is suitable only when the size of the business is small. There is a limit of every person to do work. A single individual alone cannot handle a large scale business. Therefore, this business should only be adopted when the size of the business is small.
2. Limited Capital –
There is a limit of investment and loan of every person. He alone cannot arrange a large investment. Therefore for the type of business that requires a lot of investment, this business is not a suitable option.
3. Unlimited Liability –
In sole trading, the liability of the trader is unlimited. If a business faces any loss, then his personal property can also be sold, which can make him totally insolvent. Therefore, it is not suitable in case of more risk.
4. Limited Life Span –
A sole trader is not separate from his business. If the trader dies or becomes lunatic, sick etc. then the business may totally stop. Therefore, for a limited life span, this business is not a suitable option.
5. Limited Managerial Ability –
Sole trade suffers from the limited managerial ability. The owner has to assume the responsibility of varied managerial tasks such as purchasing, marketing, etc. which may not be balanced in all the cases. Limited managerial capacity can hinder the growth of business activities.
