Sunday Emmanuel

@sundayemmanuel · 07 Dec 2021

Follow Following

What is a Business unit

A business unit is a production unit or an institution that organizes any form of economic activity for the production of goods and services. The objective of any business unit is to make a profit. Therefore, decisions on what to produce, where to produce, and how to produce are taken by this business unit. Examples of business units are a firm, a shop, and a manufacturing company.

Forms of business units

Sole proprietorship/sole Trader: a sole trader is a business owned and controlled by one person who is the provider to make a profit. It is referred to as a one-man business. He may employ other people to help him. The ownership and control of the business rest in the hands of one person. He provides the necessary capital. He does not share the profit or loss of the business with anyone.

Advantages of the sole trader

• It requires small capital to start:Sole proprietorship operates on a small scale basis. Therefore, little capital is required to start the business
• It is easy to establish:Sole
  proprietorship requires fewer legal formalities
• A quick decision is taken, that is, there is no need to consult with anybody before taking a decision
• It is easy to manage: the sole proprietor opens at convenience hour, closes at a convenient hour, and keeps a record of the account privately.
• All profit belongs to the owner since he is the sole bearer of risk
• A cordial relationship exists between the owner and the employee. (workers)
• There is close contact with the customer, he can offer personal service and credit
• There is no need to submit a balance sheet to the registrar of the company
• The owner of such business formulate policies all alone
• It is easy for the owner to withdraw his asset
  
  
  

1. He bears all risk alone. The risk is not spread among many people, because no other person is involved in the business but him alone
2. He bears all losses alone. Should the business fail, the sole proprietor bear the losses of the business alone
3. The business is not a legal entity, sole proprietor or one-man business cannot Sue somebody, neither can it be sued
4. Lack of enough capital. The one-man business may face a shortage of capital to increase the scale of the business
5. Limited expansion. Expansion may not be possible due to the inability to raise sufficient capital
6. The death of the owner may end the business. Since most activities of the business center around him, unless a competent relation takes of the business
7. Inability to face competition as a result of limited resources for improvement and expansion
8. It has a limited scope of decision and policymaking, this is because the owner of the business does everything all alone
9. No retirement age, no leave or break, he works very hard around the clock to make the business successful.
   
   Futures or characteristic of a sole proprietorship
   
   Ownership: it is owned by one person
   Liability: The liability of the proprietor is unlimited
   Source of capital: the Capital used in running the business comes from the proprietor, through personal savings, borrowing from friends, relatives, and money lenders