Question

A major disadvantage of sole proprietorship is

a)Limited liability

b)Unlimited liability

c)Easy formation

d)Quick Decision
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Answer 1

The biggest disadvantage of a sole proprietorship is the potential exposure to liability. In a sole proprietorship, the owner is personally liable for any debts or obligations of the business.

Answer 2

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A major disadvantage of sole proprietorship is .

a) Limited Liability

b) Unlimited Liability ✔︎

c) Easy Formation

d) Quick Decision

⇴ A major disadvantage of sole proprietorship is Unlimited Liability.

• A major disadvantage of sole proprietorship is that the proprietor has unlimited liability. If the business fails, the owner is liable to pay the creditors from this own assets. That means, if the sole proprietorship business fails, the creditors can recover their dues not merely from the business assets, but also from personal assets of the owner.

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➤ WHAT IS A SOLE PROPRIETORSHIP ?

↬ A sole proprietorship refers to a business organization which is owned, managed and controlled by an individual who is the owner and recipients of all the profits and bearer of all the losses/risks of the business. It is a popular form of business organization which is most suitable form for small businesses.

• According to L.H. Haney, "The individual proprietorship is the form of business organization at the head of which stands an individual as one who is responsible, who directs its operations and who alone runs the rish of failure."

➢ ADVANTAGES OF SOLE PROPRIETORSHIP :

• Quick decision making
• Ease of formation and closure
• Sense of accomplishment

➢ DISADVANTAGES OF SOLE PROPRIETORSHIP :

• Limited resources
• Unlimited liability
• Limited managerial ability
• Limited life of the business concern