PROPRIETORSHIP (SOLE TRADER)

Proprietorship or Sole Trader, as the name implies, represents the most simple type of business organization, where a single individual owns and operates the business to its entirely. The individual who establishes a proprietorship or acts as a sole trader is referred to as the sole trader. In this business structure, the sole trader assumes full responsibility for all aspects of the business, and they have the authority to initiate legal actions or be subject to legal proceedings in their own name.

Laws regulating Proprietorship or sole trader in Tanzania.

The Business Activities Registration Act [Cap 208 R. E 2002]

The Business Name Registration Act [Cap 213 R. E 2002]

The Business Licensing Act, 1972

Legal Status of Proprietorship/Sole Trader

People may ask themselves if a Sole Trader is a legal entity. The simple answer is no, it's not a legal entity. Instead, it's a way of doing business where the sole trader, can take legal action or be taken to court for things related to his business.

Advantages of Proprietorship/Sole Trader

Full Profit Ownership: Sole Traders enjoy the sole right to all the profits generated by their business ventures since there are no partners to share them with.

Simplified Establishment: Establishing a Sole Trader business is simple/easy due to less legal requirements and administrative formalities during the registration process.

Flexibility: In comparison to other business forms such as corporations and partnerships, Sole Traders can easily be transformed to other forms of business i.e corporate, partnership etc

Total control of Decision-Making: Sole Traders retain complete autonomy in making decisions related to their business. External influences or controls are minimal, allowing them to respond primarily to market dynamics.

Tax Efficiency: Sole Traders often benefit from a more favorable tax structure, resulting in lower tax obligations when compared to other business structures.

Dis-advantages of Proprietorship/Sole Trader

Solo Risk Handling: Handling business risks can be challenging as the sole trader bears sole responsibility. Seeking assistance from others can be difficult at times.

Limited Capital: The capacity to raise capital is limited to personal funds hence increases risk to the business.

Business Continuity Concerns: One major drawback is the lack of continuity. If a sole trader dies, the business typically ceases to exist because they are the sole custodian of its operations and knowledge.