Disadvantages of Sole Proprietorship Business
Sole proprietorship business refers to a business which is owned by an individual. There are many small and medium sized business houses which work under individual owners. Like all other types of business ownerships, sole proprietorship business has its own advantages and disadvantages. It is always good to know about various aspects of a sole proprietorship business before starting it. In this article, we are going to discuss a few disadvantages of sole proprietorship business.
First, in sole proprietorship business, the owner bears all the risk associated with losses in business. Unlike partnership business, people running sole proprietorship businesses have to bear all the losses incurred in their business by themselves. They do not have the facility to share their monetary losses with any other person. Second, the capital of a sole proprietorship business is limited. When a single person runs or starts a business, he finds it difficult to invest a lot of money in to it. One can say that in sole proprietorship business, people have unlimited liability and limited capital. Capital is very important to grow a business.
Third, sole proprietorship business depends on the existence of its owner. If the owner of such a business dies unfortunately then the business will also get wind up. This is seen as one of the main disadvantages of sole proprietorship businesses. Fourth, there is a lack of managerial expertise in most of the sole proprietorship businesses. When a single person applies his mind to a business then his limited approach and expertise causes hindrance in the growth of business.
Last but not the least, there is a limit to the size of sole proprietorship businesses. It is a fact that a single person cannot handle operations of various branches of his business. Due to this reason, most of the sole proprietorship businesses have a very limited size. It means that there is very less scope for growth in sole proprietorship businesses.