which of the following is a disadvantage of a sole proprietorship
It can be reinvested in the business for expansion. In this form of business organisations all the business secrets are highly retained as non-else share them. 2. A sole trader, being the supreme and sole master, can make a prompt decision, and thereby take advantage of an opportunity for gain before it slips away. The legal requirements are minimal.
It gives him an opportunity to utilize his capacity to the maximum and to enjoy freedom of action. 7. In this point, the demerits of sole proprietor are totally fixed because if seen, it is also a huge disadvantage for a sole trader. This is the seventh disadvantages of sole proprietorship and it means when a person thinks of starting a business, he first comes to mind that where I will bring the funds from?
You take the risk and get rewarded. Launching a sole proprietorship is relatively simple. Common proprietorship structures include part-time businesses, direct sellers, new start-ups, contractors, and consultants.
Despite so many advantages, both economic and social, one-man business, suffers from some very serious limitations.
Their cost of production is more and they cannot face competition from large units.
Since the business and the owner are one and the same, owner has to pay taxes as self-employed. Some of the disadvantages of sole proprietorship are:- 1. Personal contacts – A sole trader knows the customers personally and he is able to cater to their individual tastes.
Minimum Government Control 15. But in the case of a sole proprietorship, the continuity is difficult to maintain. When it comes to making serious decisions, there will be different views which will provide balance in the management.
Low Start-up Costs Sole proprietorship ranges from having no employees and up to a number of employees which is easier to deal with in terms of expenses, taxes and compensation. 14. Sole proprietorships have many advantages: they are quick and easy to set up, they do not require large amounts of money, and accounting is simple. Lacks Professional Skills and Talent 4. Share Your PDF File Society Gains as a Whole 9. Profit One of the perks of sole proprietorship is that the owner can keep all the profits to himself unlike if he is on a partnership with another individual or if he has a corporation with investors where profits will be divided among themselves.
Social desirability – This kind of business organisation develops among business people the qualities of self-reliance, responsibility, being tactful and initiative.
They take turns to manage the store, and they share the profits equally. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. This form of enterprise is, therefore, suitable in the following cases: (i) Where the capital required is small and the risk is not heavy.
So it is easy to operate. The assets will be land and building, car, and so on. Google Chrome,
This condition shows unlimited liability.
– The owner has to assume the responsibility of varied managerial tasks such as purchasing, selling, financing, etc. If this sole Individual’s health worsens or dies, then his business may also be closed and sold to the public.
But the Tax Laws and Labour Laws are required to be observed.
21. A.
An individual, however capable, cannot be expected to possess full knowledge of all branches of a business and is bound to fritter away his energies in doing things which could best be left to others in a partnership or a company. This reduces the scope of business growth. 2. (iii) Unlimited Liability – The sole proprietorship has unlimited liability. Proprietors can put things in order quickly if something goes wrong. Business Ownership & Registration - Types of Business Ownership DRAFT.
Disadvantages of Sole Proprietorship; 1.Unlimited Liability-This is the first disadvantages of sole proprietorship and it means when a person in the business pays the debts by selling the assets in the business. He can use his brilliance to good advantage. Full Control 4.
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