What do you understand by sole proprietorship firm? Explain its demerits.
What do you understand by sole proprietorship firm? Explain its demerits.
Sole proprietorship firm is a business unit where a person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of a business.
Demerits of sole-proprietorship are :
(i) Unlimited liability: If due to some reasons there are losses in business, his personal property can be utilised to pay the business debts. This discourages him to expand his business.
(ii) Limited managerial capacity: It is difficult for a sole proprietor to excel in all area of business like purchasing, marketing etc. Further due to limited resources he can't hire professionally qualified staff.
(iii) Limited life of a business concern: Death, illness, insolvency of a sole-proprietor affects the business and can lead to its closure.
Sole proprietorship firm is a business unit where a person is solely responsible for providing the capital, for bearing the risk of the enterprise and for the management of a business.
Demerits of sole-proprietorship are :
(i) Unlimited liability: If due to some reasons there are losses in business, his personal property can be utilised to pay the business debts. This discourages him to expand his business.
(ii) Limited managerial capacity: It is difficult for a sole proprietor to excel in all area of business like purchasing, marketing etc. Further due to limited resources he can't hire professionally qualified staff.
(iii) Limited life of a business concern: Death, illness, insolvency of a sole-proprietor affects the business and can lead to its closure.
