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what are the disadvantages of sole propreitorship?

Limitations of Sole Proprietorship?

Posted By admin on December 25, 2013 No Comments

Limited Capital

  • In sole proprietorship business, it is the owner who arranges the required capital of the business. It is often difficult for a single individual to raise a huge amount of capital.
  • The owner’s own funds as well as borrowed funds sometimes become insufficient to meet the requirement of the business for its growth and expansion.

Unlimited Liability

  • If sole proprietor fails to pay the business obligations and debts arising out of business activities, his personal properties may have to be used to meet those liabilities.
  • Sole proprietor hesitate from taking risks and he thinks cautiously while deciding to start or expand the business activities.

Lack of Continuity

  • The existence of sole proprietorship business is linked to the life of the proprietor. Illness, death or insolvency of the owner brings an end to the business. The continuity of business operation is therefore uncertain.

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Limited Size

  • In sole proprietorship form of business organisation there is a limit beyond which it becomes difficult to expand its activities.
  • It is not always possible for a single person to supervise and manage the affairs of the business if it grows beyond a certain limit.

Lack of Managerial Expertise

  • A sole proprietor may not be an expert in every aspect of management.
  • Because of limited financial resources it is also not possible to employ a professional manager. Thus, the business lacks benefits of professional management.

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