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Advantages and disadvantages of Sole Proprietorship

      

Advantages and disadvantages of Sole Proprietorship

  

Answers


Faith
Advantages of Sole Proprietorship
(a) Ease of starting
(b) Low cost of organization
(c) Freedom to manage
(d) Profit incentive

Weaknesses of sole proprietorship
(a) Limited size
The size of sole proprietorship is limited by the amount of capital the owner can raise, the sum of money already on hand plus what he can borrow. As the amount of capital needed increases, the owner may find it necessary to change to a partnership or even corporation
(b) Unlimited liability of debts
The claims of creditors against a business may exceed the value of its assets. In this case the personal property of the proprietor may be taken to pay business debts this often discourages people from starting their own businesses.
(c) Limited life
The business may and usually dies if the owner dies or becomes disabled especially when family members do not want to take over. Sometimes family members may take over but are unable to run it well and bankruptcy results. A sole proprietorship has no legal life beyond that of its founder.
(d) Limited management ability
Every business has many basic functions that must be performed in order for it to be successful. Depending on the type of the business these may include buying, selling, advertising, accounting and bookkeeping, insurance, credit personnel management. The fact that few people are expert in all these areas is the chief cause of most small business failures, yet the sole owner is responsible for carrying out even those functions for which he or she has no real competence.

Titany answered the question on October 26, 2021 at 12:52


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