Sole Trader Or Sole Proprietorship In Business Commerce Essay


A sole proprietorship means that a person does business in their own name and that one person owns that business as well (the word "Propriety" means owner). A sole proprietorship, or just simply proprietorship, is one type of business which in legal terms has no separate existence from its owner. Meaning, that the law does not make a difference between the property that belongs to the owner, and the things that belongs to the business, which are called assets. Hence, the limitations of liability enjoyed by other types of business; which are a corporation and partnership; does not apply to sole proprietorship. Also there is no difference between the money that the owner owes people and the money that the business owes people, which are also called debts. In short, all debts of the business are debts of the owner as well.

A sole proprietor business does not pay corporate taxes, but the owner of the business pays personal income taxes on the profit made by the business. A sole proprietor must register a "Trade name" or "Doing Business As". A business with a legal name or a registered name will allow the proprietor to open a business account with banking institutions.

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A sole proprietorship business has some advantages: The owner of this kind of business has better control of the business itself in general and better business administration is possible since there is only one owner, decision making will be quick because there is no need to consult others; there are also no legal formalities in terms of forming or dissolving a business; a sole propriety has a lot of freedom from government regulations. Every form of business ownership has some sort of government regulation to follow, but in general, this form of business has the least. For example: a sole proprietorship reports its income and deductions using just a simple one or two page tax return form, while a partnership or corporation are required to submit a tax return composing of several pages in length and also a quarterly and an annual payroll tax return; in addition, all the profit of a sole proprietorship business go directly right to the owner.

On the other hand, some disadvantages of this type of business are: businesses in sole proprietor type will likely have a hard time in raising capitals since share of the business are personal and cannot be sold; it is also sometimes difficult to apply for a bank finance, as sole proprietorship cannot grant floating charge which in jurisdiction is a sine qua non (originally a Latin legal term for "without which it could not be") of bank financing; hiring of employees may also be difficult. This form of business have unlimited liability, therefore, if the business is face with a legal case, the owner or the proprietor is personally liable; business in this form is also uncertain, because as soon as the owner decides to stop the business, or the owner eventually died, the business then suddenly ceases to exist.; another disadvantage of this form of business is that as the business becomes successful, risks that accompanied the business tends to grow.

A Partnership

Is a type of business that has between 2 and 20 partners that owns the business respectively, in which partners shares all the profit or losses of the business in which all have invested. A legal agreement should be signed, if two or more people are planning to start a partnership business. The agreement must include these points: if the partnership ends, what happens to the assets of the business. For example: the tools and the furniture; how will the profits be shared by the partners. For example: one partner works everyday on the other hand another partner only works three day a week. They would not share the profit equally because the other works more than the other; if one partner wants to leave the partnership. By having a legal agreement that includes these points, the interest of all the partners will be safe.

Every time a new partner joins, the entire partner must sign a new agreement. Each of the partners can write their own contracts for the partnership, but they must ensure that it is a valid legal contract.

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Like in a sole propriety, the laws do not recognized any difference between the partnership's assets and debts, and the partner's personal assets and debts. Also the law does not recognize any difference between different partner's assets and debts. In most countries, a partnership is considered a nominate contract between individual who, agreed to carry on an enterprise, cooperates and contributes to it, by combining property, knowledge, activities and to share its profit. A partnership is also considered a legal entity; although different legal system had reached different conclusions on this point; because partners involved have a partnership agreement, or a declaration of their partnership.

A Partnership type of business is often favored over corporations for taxation purposes. In a partnership business eliminates the dividend tax that is levied upon profits.

The most basic form a partnership business is a General Partnership. In this kind of partnership, all the partners personally manage the business and also personally liable to its debts. The other forms which have developed in other countries are the Limited Partnership (LP), in this partnership, certain "limited partners" relinquish their ability in managing the business in exchanged for limited liability for the partnership's debts; and the other form of partnership is the Limited Liability Partnership (LLC), in this form, all partners have some degree of limited liability in the partnership. There are also Private Limited Companies which are one the most common type of company that limited liability refers to the "Shareholders" who owns the company as they have purchased company shares. Shareholders are only liable to the amount they owe on the shares they purchased (this referring to guarantee). These companies are often run by families. There are 50 persons allowed in private limited companies.

A Close Corporation

A Corporation is considered to be an artificial legal entity (technically, a juristic person) which, even though have a number of natural persons or other legal entities, has a separate legal identity from them. Unlike a Company who has directors or shareholders, or a board member or chairperson; a close corporation are owned and managed by people called "Members". A close corporation can only have 10 members. The law sees a close corporation separate from its members. This means that unlike in sole propriety and a partnership, all the assets and debts of the business belongs to the close corporation, all the assets and debts of each of its member corporation have nothing to do with the close corporation. As a legal entity, the corporation receives legal rights and duties. These rights are: the ability to sue and be sued (access to court); Rights to common treasury (rights to hold separate assets from its members); the right to hire agents (the right to hire employees); the right to have a common seal (rights to govern its internal affairs); government and courts can also add other rights. Granting of additional rights to corporations is often very much controversial.

Stewart Kyd, the author of the first treatise on corporate law in English, defined a corporation as "a collection of many individuals united into one body, under a special denomination, having perpetual succession under an artificial form, and vested by the policy of the law with the capacity of acting in several respects as an individual, ..." (A treatise on the law of corporations, 1794, p.13)

The Modern Business Corporation; a type of corporation presently dominant; and in addition to a corporations legal rights, has three legal characteristics: Transferable share (membership can change without affecting the corporations legal entity); capacity for perpetual succession (this means that despite the withdrawal of any of its member, the corporation can possibly exist); and limited liability (members have limited responsible in the corporation in terms of debts).

Corporations may also be formed fir local government (municipal corporation), charitable purposes (non-profit corporation), or for political, religious, or government programs (government-owned corporation). As a generic legal term, a corporation can be any group that has a legal personality.

Why Go Global

Companies tend to globalize to conquer new marketing grounds. There is actually no agreed starting point when did globalization began. Globalization in general refers to as the increasing integration of capital, goods, and services to the world market.

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Globalization, in order to develop, uses three forces; Migration (the human or the work force), international Trade, and capital integration of financial market. There are some factors that can affect globalization. A company going to a global market without proper knowledge of what lies ahead, is suicidal. A country's culture should be given consideration and thoroughly studied before venturing in global market. One interesting way to evaluate culture is to consider the people's sense of humor. A person should ask himself these questions; is it self-effacing? Does it insult other culture? Is it innocent? Does it promote racism? This can provide an insight in to what approach to consider when tackling international cross-cultural issues. A company planning to go global should be prepared to whatever obstacles and challenges that accompanied this goal.

A country's geographical information should also be given consideration, because by doing so a more precise plan on marketing plan can be develop. Knowing China's geographical information would be very handy when it comes to marketing strategy. It would be easy to formulate plans on logistics. Meaning more products can be market on every part of the country. More part of the country would be available for market.

Knowing all these factors doesn't mean it will eventually prevent any more conflicts to occur, but it will absolutely reduce the probability that a conflict can occur. Still the best solution to avoid such problems is to take intermediate actions to solve them. Solving a problem immediately can avoid the possibility for the problem to grow. Once a problem occurred a proper and ready-made solution should be done.

Factors in entering foreign market

There are certain that may affect a company in venturing into the global market. These factors should be considered in order to operate in global trade smoothly. A company's direct investment is needed in order for a company to operate in the global market. The company should have enough money to invest. In a corporate industry where money is the fuel for progress, a company that have enough resources can male it big in the global trade. Money is resources, without these resources to invest, it would be impossible to pursue the global market; Joint venture (often abbreviated as JV), is formed between two or more parties that agrees to undertake economic activities together. Both parties involved in this agreement, agreed in both contributing equity, they then share the enterprise's revenue, expenses, and control of the enterprise; Licensing, in order to avoid legal case, licensing is necessary in all type of business. Especially in venturing into foreign territories, it is important to furnish all legal aspects before conducting business; by these means the company can operate their business without flaw. Exporting is marketing a certain product globally or in other word, it is sending goods for sale or exchange to other country abroad.

Importance of business strategy

It is important for a company to have a god business strategy. By managing a company's strategy a specific objectives, policies, and plan will be developed that will help the company in achieving its goals. This will provide an overall direction for the company. A good strategy should be appropriate for the company's over all resources, environmental circumstances, and the company's main objective in general. It also should match the company's strategic advances to the business environment that the company faces. A good strategy must also integrate the company's goal, policies, tactics, and values. Future trends should be given consideration too because this will enable the company to adapt in future marketing trends, this way the company can adapt to changed and not be left behind.

Types of Marketing Strategies

Every marketing strategy is unique, each beneficial in different kinds of business. Each strategy is and can be reduced into generic marketing strategy. Strategies based on market dominance in this scheme, company's are classifies according to their market share or their dominance in the industry; Porter Generic strategies, are strategy that is based on the dimension of strategic scope and strength of the company. Strategic scope refers to market penetration, on the hand strategic strength is the company's sustainable competitive advantage; innovation strategies, deals with the company's new product development and business innovation; Growth stage, in this strategy, the question, "How should the company grow?" should be answered. The most common answers are; horizontal integration, vertical integration, diversification, and intensity; marketing warfare strategy/warfare-based strategy, that try's to withdraw parallels between business and warfare; it applies military strategy to business situations. Unlike in a Warfield, the enemies to consider in the business field are the competitors.

Key Steps towards a Strategic Plan


The first step toward a strategic plan is to have a realistic vision for the company's business. A good strategy plan should be able to visualized future trends to come. A strategic vision should consider future products, processes, customers, markets, staff, location, etc.


This indicates the purposes of the business. The nature of the business is also expressed in terns of mission. For example: "designing, developing, manufacturing, and marketing a specific product line to meet the needs of a specific customer group through a certain distribution market in a particular area." This indicates what the business is about. We can say that a company is specializing in marketing a certain product, to a certain group of consumer, in a certain location.


Values govern the operation of the business, its conduct, and its relationship with the society, the customers, its supplier, employees, and the local community.


This is what the company wants to achieve in either for short or foe long term. Objectives should also relate to the requirements and to the expectations of all the members, including the employees. Objective should reflect to the main reason why the business is running.


Are the rules and guidelines by which all the objectives and mission may be achieved. Strategy can also cover the business as a whole which can include diversification, acquisition plans, and organic growth. Or strategy can also be related to the primary matters in business key functional areas.


Goals are specific objectives to be achieved on a time-based measurement or in a specific time set. Goals should be realistic and achievable.


These are what set out the implementation plans for key strategies. Program should cover resources, time-scales, deadlines, objectives, performance targets, and budget as well.

Importance of Marketing Strategy