THE CHALLENGES AND PROSPECTS OF SOLE PROPRIETORSHIP
Background of the Study
Historically, sole proprietorship is defined as the oldest, most common and simplest form of business organization. Sole proprietorship is unofficial because it is not subject to federal or state regulation, also it is relatively simple to manage and control. In this type of business, one person that is the proprietor provides all the capital required to carry on the business.
Characteristics of sole proprietorship are that the owners are inseparable from the business. More so, that proprietor provides the initiative controls the business and retains all the profit arising from the business. The owner takes all the risks and bears all the losses sustained in any bad year. However, we should remember that those who lend money and extend credit to the sole proprietorship also should be part of the risk in that. A loss, incuitably falls on them if the owner proves unable to pay the debts.
A sole proprietorship is a company which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company but he/she reports business income or losses on his/individual income tax return.
However there are other forms of business organization such as:
Partnership Business: Which is the association of people who co-owned a business for the purpose of making profit?
Limited Liability Company: Is a business owned by a number of people, operated as a legal person on behalf of its owner with the usual motive of profit.
All these business organizations are formed for the purpose of making profit. Despite these forms of business statistics shows that much eighty five percent business organization in Nigeria today is sole proprietorship whether in small scale or collage industries.
However, one of the characteristics of sole proprietorship which is profit motive has been created by making a good production in other to satisfy their customer. Therefore, sole proprietors should try to produce the right product in other to satisfy the customers.
Business organization therefore should research on the challenges and prospect which will help them in a good production. Also this research work of Ugomentus enterprises Nigeria limited will be of help.
Statement of the Problems
It has been observed that sole proprietors contend with daunting challenges.
Taking the plunge and becoming your own boss is risky at the best of times, but the danger for sole traders is higher than for other types of business. According to official statistics, sole traders are more likely to fail than any other kind of small business with 20% of self-employed people packing up their ventures each year. It is easy to see why the cost and time pressures of establishing a business is a huge burden for just one person. Indeed, there are amyriad of challenges that face sole trader when they standout.
Sole proprietors have to realize that a one person company can’t keep up with businesses that have multiple employees. The world more so quality today and sole proprietors will have to think about how to evolve their business and potentially bring on management team.
No matter what industry they are in, its most important for sole proprietors to be organized are efficient in order to succeed.
Another challenge of sole proprietorship is “decision making” and management control. Sole proprietors are in full control of every aspect of the business. Sole proprietors do not engage the services of competent and qualified personnel. The result in taking irrational decisions which impact negatively on business operation. Hence, lack of requisite skills and knowledge pose daunting impediments to the growth of the business.
Life is a challenge to sole proprietorship. A sole proprietorship will automatically end if the owner dies, decides to retire, or sell the business. This is in contrast to a corporation or LLC (Limited Liability Company) which enjoy continuity.
Purpose of Study
The broad objectives of the study are to examine that challenge and prospects of sole proprietorship. The study also includes:
Determine the sources of fund for the sole proprietor.
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