Merits and Demerits of Sole Proprietorship, for Class 11 and Class 12 students, CBSE and other boards.
There are lot of people, such as freelancers and consultants who operate as a sole proprietor.
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While there are some obvious benefits such as the proprietor having more control over the business. However, the obvious disadvantage is that the business cannot grow beyond a particular point, as it is limited to just one person.
Suitability of Sole Proprietorship can be measures by ascertaining the merits and demerits of Sole Proprietorship.
Merits of Sole Proprietorship
Ease of formation and closure of the business entity.
Quick decision making – Control of the business is in the hands of a single owner.
Confidentiality of information, its easy to maintain secrecy of information.
Membership is in the hands of a single person, so single owner of the profit (direct incentive).
One gets a sense of accomplishment, so all the success is attributed to the owner.
Demerits of Sole Proprietorship
Unlimited liability for the sole proprietor.
Unlimited managerial ability because everything is being managed by the owner – marketing, operation, etc.
Limited life of a business concern.
Limited resources. Because everything is in the hands of a single owner, the resources (assets, cash etc.) will be limited.
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