√ Definition of Sole Proprietorship, Terms, Characteristics, Strengths & Weaknesses and Examples

Definition of Sole Proprietorship, Terms, Characteristics, Strengths & Weaknesses and Examples – In this discussion, we will explain about individual companies. Which includes the definition of a sole proprietorship, the requirements for establishing a sole proprietorship, the characteristics of a sole proprietorship, the advantages and disadvantages of sole proprietorships as well as examples of sole proprietorships which are discussed in full and light. For more details, please see the review below carefully.

Definition of Sole Proprietorship, Terms, Characteristics, Strengths & Weaknesses and Examples

Let's discuss the meaning first carefully.

Definition of Individual Company

Generally, an individual company is a form of BUMS (Private Owned Enterprise) which is safe, this form has profits or advantages and disadvantages or weaknesses in a company in the form of an individual that has the effects of the company form individual.

Definition of Sole Proprietorship According to Experts

According to experts, a private company is a company owned by a person who is fully responsible for running the business. In a company of all types of capital, profits and risks are borne by the owner of the company. This type of company is often found in Indonesia because it is very simple and easy to organize.

1. Murti Sumarai, Jhon Suprianto (2003)

   The definition of an individual company according to Murti Sumarai, Jhon Suprianto is a company that is owned, managed, and led by someone who is fully responsible for all risks and activities company.

2. Hatta

   The definition of an individual company according to Hatta is a business established by an entrepreneur

3. Private Bass (2002)

   The definition of an individual company according to Basswasta is a form of business owned by a person and he is fully responsible for all risks and activities in a company

4. Wikipedia

   The definition of a sole proprietorship company according to Wikipedia is a company or business that is owned by a sole proprietor while an individual company is the owner of a sole proprietorship.

From looking at some of the definitions above, it can be concluded that an individual company is a form of business that is established, owned and managed by someone. Sole proprietorship is often used in Indonesia. This form of company is often used as a small business activity, or during the initial period of holding business activities, such as in the form of shops, restaurants, workshops, and so on.

Although the number of existing companies is currently more, the sales volume of each is relatively small when compared to other companies.

Requirements for Establishing a Sole Proprietorship

To set up a sole proprietorship company, permits are issued with relatively lighter and simpler requirements when compared to other types of companies. So far, the government has not determined a special category regarding this form of business, if there is no legal separation between corporations and private interests. All company affairs become one with the personal affairs of the company owner.

If someone is going to set up a company, with the choice of type of business that is risky, the company is not big, the capital itself is from an established company does not need more and if the entrepreneur really wants to manage and lead himself and also wants to Being responsible for legal consequences that could have occurred without the help of other people is the right choice to form a business entity individual.

The conditions for establishing a sole proprietorship company are as follows:

The requirements for setting up an individual company can be grouped into three important aspects, including capital, bookkeeping and tax payments.

1. The owner as an entrepreneur must find a suitable source of capital. Owners may consider personal savings, loans from family or friends, bank loans and so on. The amount of capital needed must also be calculated accurately.
2. To prepare the books, the owner of a sole proprietorship company must include the following points:
   • The state of the company's assets
   • Company needs
   • Work agreement
   • Incoming and outgoing letters, documents, correspondence
   • Reports per period (per month, quarter, year)
   • files
3. Tax payments should also be a concern, the types of taxes paid to the State are:
   • income tax
   • Value added tax on goods and services
   • Sales tax on luxury goods
   • Property tax

Currently, the government is paying more attention to balancing small companies' businesses as one of the development strategies.

• Increase the productive capabilities of human resources, because they learn where they work
• Develop small companies that can involve large amounts of natural resources
• In the short term can provide a solution to the problem of income sharing and unemployment problems
• Increasing the speed of change in the economic structure across regions, as well as the geographical spread of economic activity

Characteristics of a Sole Proprietorship

The characteristics of a sole proprietorship are as follows:

• Owned by an individual (individual or family company)
• Individual company capital is usually smaller or not too large
• The management system is simple
• Business continuity depends on the owners
• The sales value and the added value created are relatively small

Advantages And Disadvantages Of Sole Proprietorships

In a sole proprietorship there are advantages and disadvantages, which include:

Advantages of Sole Proprietorship

1. Receive all the profits, only the sole proprietorship allows all profits to go to someone
2. Free to move. The owner of a private company has complete freedom in every activity. All decisions are absolute must be made in accordance with the decision.
3. Low taxes. For individual companies until now the government does not collect taxes from the company itself. Collection of fees is only done on the owner, namely, income tax.
4. Cheap and simple organization. In a private company, the parts are not as many as in a PT, so the costs required for this are relatively low
5. Lack of regulations. If in an association with a firm, limited partnership, PT, there are many government regulations that must be obeyed, then in an individual company only a few regulations are imposed.
6. Guaranteed company secrets. A sole proprietorship is a type of company where secrets can be guaranteed not to leak. Moreover, if the owner of the company itself is carrying out all the important tasks. In some companies, the big advantage lies in having a secret process or formula that other companies already know.
7. Decisions can be made quickly. Decisions in a private company can be taken quickly because the owner of the company can manage the company according to his will. the best and most effective, and also because there are no disagreements that lead to protracted negotiations which are of course detrimental in the world business
8. Company push. Entrepreneurs of individual companies will always try their best so that the company can make a profit regardless of the length of time working in the company.
9. It's easier to get credit. It is easier for individual companies to obtain credit because there is no responsibility or collateral limited to the business capital itself but also the personal wealth of the owner, the credit risk is more small.

Disadvantages of Sole Proprietorships

1. The size of the company is limited, the investment carried out by an individual company is limited. Although the owner is trying to expand the company, the credit obtained is also limited
2. Unlimited liability. In an individual company, the responsibility of the company lies with the owner of the company so that the risk for a company is borne by the owner of the company. If the company cannot pay off all of its debts then personal wealth becomes collateral.
3. The continuity of the company is not guaranteed. If the owner or leader of the company dies, is imprisoned or for other reasons so that he is unable to manage the company, it causes the company's activities to stop
4. Difficult in management. In a company all activities such as buying, selling, seeking credit, spending, managing employees and so on are fully held by a leader. This is more difficult than management held by several people.
5. Limited financial resources. Because there is only one owner, the efforts made to obtain sources of funds depend only on the ability of the company owner
6. Lack of opportunities for employees. Employees who work in individual companies will remain in their positions for a relatively long time.

Example of Sole Proprietorship

Examples of individual companies are batik companies, sarong and salon companies, hair salons, and so on.

From the example of a private company above, there are advantages and disadvantages, namely:

Advantages or Advantages of the sole proprietorship form:

• Businesses are easier to form and dissolve
• Flexible management or management (the owner is free to manage his company)
• It works simply
• All secrets can be guaranteed
• All profits are own

Weaknesses or disadvantages of the sole proprietorship form:

• Unlimited liability, carried by the owner himself
• Business continuity is not guaranteed
• Difficulty in finding or increasing capital
• Limited ability to organize and manage a company

Thus has been explained about Definition of Sole Proprietorship, Terms, Characteristics, Strengths & Weaknesses and Examples, hopefully can add to your insight and knowledge. Thank you for visiting and don't forget to read other articles.