Majority of
business enterprises in Nigeria are one man enterprises. As the name implies,
sole proprietorship which means it is being organized, sponsored, financed and
controlled by one man sole proprietorship requires only small capital to start
operating.
Advantages of one man business
enterprises include:-
·
Unnecessary
bureaucracy or red-tapism is entirely not present or is reduced. Because of the
independence the sole proprietor enjoys, he controls, manages his business and
owns full responsibilities for his business.
·
Decision of a
sole proprietor are very quick because he does not need to procrastinate or
consult anybody or party before acting. Delay causes a lot of set backs in some
businesses especially in joint business when action will not be taken by one
man even if the other party is away to a distant place.
·
Profits of the
one man’s business are controlled by just the owner of the business. He does
not declare dividends to shareholders since he has no shareholders involved in
the business.
·
Simplicity of one
man business i.e. no legal conditions attached, the sole proprietor winds up
whenever he wants. He adheres to the general laws and regulations as stipulated
by the government.
·
Capital
requirement. It unlike large scale businesses where large is needed to finance
it unlike large to extensive borrowing, but that of one man business which is
not entirely necessarily.
·
Privacy on
business. A sole proprietor does not have to submit his balance sheet to
registrars of companies yearly for inspection and as such he enjoys privacy and
no one knows the profit he makes annually, unlike other large scale businesses.
Disadvantages:
However, a one man business enterprise is not devoid
of disadvantages entirely. Some of these includes:-
I.
Limited amount of
capital makes it very difficult for a small scale business of a sole proprietor
to expand. Banks and other financial institutions find it very difficult to
lend one man business owners’ money because in most cases they don’t have
collateral securities which are very vital to making loans available.
II.
The management
problems. At times, if the sole proprietor lacks managerial acumen, his
business will collapse. Also, the business may grow rapidly that the owner may
not effectively manage it and at this condition he will be forced to look for
partners to team-up with and manage the business and failure to do this, the
business will die-off.
III.
Limited liability
benefits are not enjoyed by a one man small scale business enterprise because
he may spend all he has to settle debts if the business collapses.
IV.
Untimely death of
a sole proprietor of a business leads to the end or collapse of that business
enterprise, unlike a jointly owned business where the business still goes on
even after the death of a partner, there is always lack of continuity when the
owner dies and this is another important disadvantage in one man business.
V.
Risk bearing:
when the business fails to realize profit the owner alone bears the risk. For
instance, when the products of a one man business are being conveyed from an
area of production to proprietor suffers the loss especially if the business is
not covered by a comprehensive insurance policy.
VI.
Radically
decisions are usually taken by a one man business without which consideration
and this may militate against the progress of the business. In a joint
business, before a decision is taken it must be well considered (i.e. the pros
and cons) and it takes fairly good deliberations because joint decision is
better than a sole (single) decision. This goes by the saying that two good
head are better than one good head.