CHAPTER 5

Sole Trading Concern

 Sole Trading Concern
Concept of Sole Trading Concern
• It is the form of business that is owned, managed and
controlled by the single person.
• makes all the investments, bears all the risk, profit and
losses, manages and controls the business by himself.
Characteristics of Sole Trading Concern
1. Sole Ownership/ Single ownership
• It is established by one individual through his single
ownership.
• He provides the entire capital either from his private
property or by borrowing from financial institutions
and friends
 Sole Trading Concern

Characteristics of Sole Trading Concern

2. Sole management and control
• management and controls the business according to his
desire, skill and capability.
• own skill, experience and knowledge to take decision
3. unlimited liability
• Liability of sole trader is not limited up to his capital
investment
• Sole trader is totally liable for all debts and obligations
 Sole Trading Concern

Characteristics of Sole Trading Concern

4. No sharing of profit
• bears the complete risk and there is nobody to
share the profits or losses.
5. No Legal entity
• If the owner is suddenly dead, his/her business
automatically dissolves.
6. Limited area of operation
• The scope of a sole trader is limited because of
limited capital, limited managerial ability.
 Sole Trading Concern

Characteristics of Sole Trading Concern

7. Secrecy
• The information relating to business are not
required to share with others.
8. Independent decision
• He or she does not need to take consent of others
while making the decision.
9. Flexibility
• A sole trader can expand, change and reduce his
business activities at any time as per his own wish.
 Sole Trading Concern

Advantages of Sole trading concern

1. Easy to start and dissolve
• A person can start any business operation whenever he
likes and similarly a sole trader can dissolve his
business at any time at his will.
2. Quick (Prompt) decisions
• A sole trader can take decision by himself immediately
according to his experience and efficiency.
• So decision is quick and timely in sole trading concern.
 Sole Trading Concern

Advantages of Sole trading concern

3. secrecy.
• secrecy can be maintained as whole business is
handled by the proprietor himself and as such the
business secrets are known to him only.
4. Direct motivation to owner
• There is always direct relationship between effort and
reward.
5. Personal relations.
• A sole trader develops and maintains intimate contacts
with his customers and employees
 Sole Trading Concern

Advantages of Sole trading concern

6. Personal supervision and control
• The sole traders act as both owner and manager so, he
can easily maintain business relations with all
concerned parties like customers, suppliers employees.
7. Flexibility
• No legal formalities are required for making changes in
operation.
• easily expand, change, modify or reduce the line of
business according to his will.
 Sole Trading Concern

Advantages of Sole trading concern

8. Social benefit
• It provides various information related to product, it
provides opportunity for self-employment, provide
goods in cheaper rates, provides employment
opportunity.
 Sole Trading Concern

Disadvantages of sole trading concern

1. Limited capital
Financial resources of sole trader are very limited.
2. Limited managerial ability
All the qualities such as judgment, innovation, creative skills etc are rarely found in
one person.
3. Unlimited liability
The owner must pay the liability of his business by selling his private properties if
the assets of business are not sufficient to meet such liabilities.
4. Uncertain existence
The continuity and existence of a sole trading concern is the most uncertain.
5. Loss in absence
In the event of long illness or due to some unforeseen or unpredicted
circumstances, the trader may not be able to attend his business.
6. Limited scope for expansion
Due to the limitations of capital and in effective management, sole trading concern
cannot grow and expand to a large scale.
 Sole Trading Concern

Disadvantages of sole trading concern

7. in appropriate decision
• All types of decisions are taken by the sole trader.
• He always takes quick or prompt decision to get
individual benefit.
8. Lack of specializations.
• There is no division of work.
• specialization is to possible
 Sole Trading Concern

Registration of Sole Trading Concern in Nepal

• Sole trading concern should register in concerned
department of government of Nepal under private firm
registration Act, 2014 BS.
• According to clause 3(1) of private firm registration act,
2014 has declared that “ after the commencement of
this Act, no one can operate private firm without
registering under this Act.”
• If sole trading is related to commerce, then it should be
registered in the department of commerce .
• If it is related to industry then it should be registered in
the department of industry of Nepal government.
 Sole Trading Concern
Procedure of Registration
1. Application form
• The person who wants to register private firm should apply in the
presented form in the concerned department of Nepal
government. The application form contains the following details.
- Name and address of the private firm
- Amount of capital investment
- Objectives of the firms and statement of work.
- Name and address of the owner and his father and grandfather.
- Other particulars as presented by Nepal government.
• In the application form ticket of Rs 5 must be attached.
• Along with application form other documents such as copy of
citizenship certificate of applicant and registration fees should be
submitted.
 Sole Trading Concern
2. Deposit of registration fees
• Required registration fees must be deposited in the
bank account of Nepal Rastra bank an the voucher
of it should be enclosed with the application.
Capital Investment Registration Fees
Capital up to Rs. 1,00,000 Rs. 700

Capital up to Rs. 3,00,000 Rs. 2,100

Capital up to Rs. 5,00,000 Rs 4,100
Capital up to Rs. 10,00,000 Rs 7,600
Capital up to Rs. 50,00,000 Rs. 10,100
Capital more than Rs. 50,00,000 Rs. 15,100
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3. Receive the certificate of registration.

• concerned department will examine and scrutinize
the particulars of the application.
• If the concerned department is satisfied with the
application, the firm will be registered.
• the department will issue the “ certificate of
registration”.
 Sole Trading Concern

Effects of Non-registration
• It can’t get loan form any financial institution.
• Concerned department of government of Nepal will
charge form Rs 5 to Rs 50.
• If same crime is repeated for 3 times, additional fine
Rs. 10 is to be paid.
• If it is committed again then sole trading concern is
closed and no any concern can be established under
this name.
 Sole Trading Concern

Renewal of Sole Trading concern in Nepal

• All the registered firms should be renewed each year.
• application for renewal with renewal fee should be
submitted to concerned department.
• The renewal of firm must be done within 35 days after
completion of each fiscal year.
• A renewal fee of the private firm is charged according
to capital however the amount of renewal fee payable
may be amended and is published in Nepal gazette.
 Sole Trading Concern

Renewal of Sole Trading concern in Nepal

Capital Investment Registration Fees
Capital up to Rs. 1,00,000 Rs. 100

Capital up to Rs. 3,00,000 Rs. 125

Capital up to Rs. 5,00,000 Rs 150
Capital up to Rs. 10,00,000 Rs 200
Capital up to Rs. 50,00,000 Rs. 250
Capital more than Rs. 50,00,000 Rs. 300
 Sole Trading Concern

Effects of Non – renewal

• Renewal of Sole trading concern must be done
within 35 days of new fiscal year.
• . If the firm is not renewed within the prescribed
time a fine of Rs. 35 will be charged up to the last
date of Ashwin.
• After the expiry of that time period Rs. 150 will be
charged.
• If not renewed the company may be closed.