10 Advantages and Disadvantages of Sole Proprietorship

What is Sole Proprietorship?

Sole Proprietorship is a type of business where there is a single owner of the company, and he is a single decision-maker of the company.
It is a business which is owned and managed by a single person. It is one of the simplest and easy types of business. Many peoples work in these businesses but are managed by a single person. These type of business need the least formalities to be followed. It is one of the oldest types of business model. The owner employs a different person for performing various activities.

Features of Sole Proprietorship

Single Owner  

It is a one-man business. There are no partners in these types of business. A single person owns and manages the whole business. He himself shares the losses and profit of the business.

Unlimited Liability

The liability of a sole proprietorship is unlimited. Here the only owner is liable for all the losses and debts of the company. Even his personal properties can be used for paying debts in case of loss. 

Minimum Rules & Regulations

It is one of the easiest types of business to be practiced. There are fewer regulations by the government on this type of business. The main aim of established

Independent Decision-Making

Here the only owner is responsible for decision-making. He alone can take all decisions regarding the business. He did not need to ask any other person for their consent.

Single Profit & loss Sharer

There is only one person who solely shares all the profit & loss of the business. He himself bears all the losses of the business. There is no second person who shares business loss or business.

Advantages of Sole Proprietorship

Easy to Startup & End Business

It is one of the easiest types of business to be practiced. There are very regulations by the government on these businesses. It needs very less effort & money to run this business.

 No Profit-Sharing

There is only a single person who owns & controls these businesses. He himself share all profit of the business. He need not distribute profit to another person as there is no partner.

 Free to Take Action

A sole trader is all free to take any decision regarding the business. There is the only person who solely manages the whole business. He did not need to anybody else consents.

Flexibility in Business

These types of business are so flexible in their operations. Any change required can be brought easily and shortly.

 Tax Benefits

The owner of this business enjoys several tax benefits. He is saved from paying double taxes. All profits of the business are treated as his personal income. He enjoys all the benefits of an individual.

Disadvantages of Sole Proprietorship

Finance is Limited

The finance available for this business is very limited. There is the only owner who invests money in the business. No second-person make any contribution in business.

Liability is Unlimited

The liability of this type of business is unlimited. The personal property of the owner is used for paying off business debts. He himself is liable for all the debts of his business.

Improper Decision-Making

There is only one person in the business who takes all the decision. He may make poor decisions which affect the working of the business. There is no one to guide him in his business. 

Life is Uncertain

There are various problems in this business. Full responsiveness of business lies on a single person. If he falls ill, operations of the business are affected. He is one who manages all the finances for the business. So, the life of this business is limited.

Size of Business

The level of operations of these sole proprietorship is small. There is limited finance to expand the operations. There is a single person who manages all the finances for the business. It becomes difficult to increase the size of the business.

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