Explain any three merits and any three limitations of Sole proprietorship

cbse
formsofbusiness

#1

Sole proprietorship enjoys following merits :
(i)Ease of formation and closure.
(ii)Prompt decisions.
(iii)Flexibility.
For explanation refer Q. 1. Long Answer types Questions.
Sole proprietorship suffers from following limitations:
(i)Limited financial resources : Financial resources of a sole proprietor are limited to his/her personal savings and borrowing from banks and relatives. Lack of resources is one of the reason behind limited size and small scale of his business.
(ii)Limited life of business concern : The sole proprietorship (business) and the owner are considered one and the same by the law. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.
(iii)Limited managerial ability : As it is rare to find an individual excelling in all the areas of business. Thus, decision making by the sole proprietor may not be balanced in all the cases. Also due to limited resources sole proprietor may not be able to employ and retain professional and experts.