CHALLENGES AND PROSPECTS OF SOLE PROPRIETORSHIP
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CHALLENGES AND PROSPECTS OF SOLE PROPRIETORSHIP
CHAPTER 1.
INTRODUCTION
Background to the Study
Historically, sole proprietorship has been characterised as the oldest, most popular, and simplest type of business organisation. Sole proprietorship is unofficial because it is not subject to federal or state law; also, it is generally easy to maintain and regulate. In this sort of business, one individual, the proprietor, supplies all of the capital required to operate the business.
Sole proprietorships are distinguished by the fact that their owners are inextricably linked to their firm. Furthermore, the proprietor takes the initiative, runs the business, and retains all profits from it.
The owner assumes all risks and bears all losses incurred in any bad year. However, it is important to note that individuals who lend money and give credit to sole proprietorships bear some of the risk as well. If the owner fails to pay the bills, they will undoubtedly suffer a loss.
A single proprietorship is a business that is not registered with the state as a limited liability company or a corporation. The owner does not pay income tax separately for the company, but he or she does disclose business income or losses on his or her personal income tax return.
There are different types of company organisation, such as:
Partnership firm: What is an organisation of persons that co-own a firm for the goal of profit?
Limited Liability Company: A firm owned by a group of persons that operates as a legal person on behalf of its owner with the primary goal of profit.
All of these corporate organisations are created with the goal of producing money. Despite various forms of company, data reveal that more than 85% of businesses in Nigeria today are sole proprietorships, whether in the small scale or collage industries.
However, one of the features of a sole proprietorship, profit motive, has been developed by producing a high-quality product in order to satisfy their customers. Therefore, sole proprietors should endeavour to produce the proper goods in order to please the clients.
As a result, businesses should conduct research on the problems and opportunities that will assist them in producing high-quality products. Also, Ugomentus Enterprises Nigeria Limited’s research will be beneficial.
Statement of Problems
It has been found that solo proprietors face significant hurdles.
Taking the jump and being your own boss is risky at the best of times, but lone traders face greater danger than other types of businesses.
According to official figures, sole traders are more likely to fail than any other type of small business, with 20% of self-employed people quitting their businesses each year.
It’s simple to see why the costs and time constraints of starting a business are such a burden for a single person. Indeed, there are numerous problems that solo traders encounter when they stand out.
Sole entrepreneurs must realise that a one-person company cannot compete with businesses with several staff. The world is becoming more quality-conscious, and solo entrepreneurs will need to consider how to grow their business and even hire a management team.
To thrive, lone proprietors must be organised and efficient, regardless of the business they operate in.
Another problem for sole proprietorships is “decision making” and management control. Sole entrepreneurs have complete control over all aspects of their firm. Sole proprietors do not use the services of competent and qualified people.
The outcome is irrational actions that have a negative influence on corporate operations. As a result, a lack of necessary skills and expertise creates significant barriers to corporate success.
Life is a difficulty for sole proprietorships. A sole proprietorship terminates automatically if the owner dies, retires, or sells the business. This is in contrast to corporations and limited liability companies (LLCs), which have continuity.
Purpose of Study
The study’s broad objectives are to investigate the challenges and potential of sole proprietorship. The study also contains:
Determine the source of funds for the lone proprietor.
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