Advantages and Disadvantages of Sole Proprietorship

हिंदी में पढ़ें:

A sole proprietorship business is a business operated and managed by a single owner. Only one person bears all the profit and loss. The advantages and disadvantages of sole proprietorship business are given below.

Note: Sole proprietor, sole proprietorship, sole proprietor business, sole proprietorship business are the same.

Advantages and Disadvantages of Sole Proprietorship

Advantages of Sole Proprietorship

Following are the advantages of Sole Proprietorship:

1. One Person:

A sole proprietorship business is run by only one person and that person is called the owner or proprietor. In sole proprietorship business, one person means using whose name the business is being run.

2. Easy to Start:

Sole proprietorship business is the easiest business to start and run compared to other types of businesses. Anyone can start and run it. If license or certificate is required then it becomes necessary for the owner to have Aadhar card, PAN card etc.

3. Full Control:

In a sole proprietorship business, the owner of the business has full control over the business due to one person. In the eyes of the law, all business decisions and decisions related to the business are taken by the business owner, even those taken by others.

4. Easy to Close:

It is easy to close a sole proprietorship business as there are no formalities or any governing laws, just settle the account and close the business.

5. No Formality:

Any person can enjoy sole proprietorship business as there are no formalities unless the governing authority passes any rules and regulations.

6. No Profit Sharing:

No profit sharing is an advantage of sole proprietorship business. In Sole Proprietorship business there is no need to share the profits with others, all the profits are taken by the single owner as there is only one owner.


Disadvantages of Sole Proprietorship

Following are the disadvantages of sole proprietorship:

1. Unlimited Liability:

In a sole proprietorship business, the liability of the owner is unlimited because in a sole proprietorship business the owner and the business are one and the same. If the business assets are not sufficient to repay the debt, the owner’s personal assets are used to repay the debt.

2. Limited Growth:

Business growth is limited in a sole proprietorship because the business is operated, managed, and financed by only one person. The growth of business becomes limited due to single person and limited resources.

3. Fully Responsible:

In a sole proprietorship business only one person is responsible for any act, even the act done by another person, which is why this is the disadvantage of sole proprietorship business.

4. Hard to Leave:

Taking leave from the business is a challenging task for a sole proprietorship business owner, because a sole proprietorship business is run and managed by only one person. If the owner takes leave, he or she may have to close the business until the leave.

5. Difficult to get Loan:

Due to Un-registration and uncertainty of the business, it becomes difficult for the owner to obtain loans from the market. In today’s time some documents help in getting loan from the market like GST Registration, MSME Registration, Shop Act Registration etc. but the problem is that if the owner takes this document, then he is bound by the responsibility set by the governing authority.


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QNA/FAQ

Q1. Write the advantages of sole proprietorship.

Ans: Following are the advantages of Sole Proprietorship:

1. One Person
2. Easy to Start
3. Full Control
4. Easy to Close
5. No Formality
6. No profit sharing

Q2. Write the disadvantages of sole proprietorship.

Ans: Following are the disadvantages of sole proprietorship:

1. Unlimited Liability
2. Limited Growth
3. Fully Responsible
4. Hard to Leave
5. Difficult to get Loan

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