Advantages and Disadvantages of Sole Proprietorship
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Advantages and Disadvantages of Sole Proprietorship
Advantages and disadvantages of Sole Proprietorship
Advantages:
Easy to Form and Wind Up:
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Easy and simple form of business organisation.
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No legal formalities are required to be observed.
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Business can be wind up any time if the proprietor so decides.
Quick Decision and Prompt Action:
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Nobody interferes in the affairs of the sole proprietary organisation.
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So, quick decision can be taken.
Direct Motivation:
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Entire profit of the business goes to the owner.
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Motivates the proprietor to work hard and run the business efficiently.
Flexibility in Operation:
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Easy to effect changes as per the requirements of the business.
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Not require many formalities
Maintenance of Business Secrets:
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Business secrets are known only to the proprietor.
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Not required to disclose any information.
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Not bound to publish his business accounts.
Personal Touch:
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Easy to maintain a good personal contact with the customers and employees.
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Helps to run business smoothly.
Disadvantages
Limited Resources:
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Not always possible to arrange sufficient funds.
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Proprietor has a limited capacity to raise funds for his business.
Lack of Continuity:
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Illness, death or insolvency of the proprietor can lead to closure of the business.
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So, continuity of business is uncertain.
Unlimited Liability:
Personal properties of the owner can also be used to meet the business obligations and debts.
Not Suitable for Large Scale Operations:
Resources and the managerial ability is limited, so, not suitable for large-scale business.
Limited Managerial Expertise:
A Single person may not be an expert in all fields like, purchasing, selling, financing etc.