Explain the limitations of sole proprietorship in brief.
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Sole Proprietorship
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What is a Sole Proprietorship?
A sole proprietorship (also known as individual entrepreneurship, sole trader, or simply proprietorship) is a type of an unincorporated entity that is owned by one individual only. It is the simplest legal form of a business entity.
Sole Proprietorship
Note that, unlike the partnerships or corporations, a sole proprietorship does not create a separate legal entity from the owner. In other words, the identity of the owner or the sole proprietor coincides with the business entity. Because of this fact, the owner of the entity is fully liable for any and all the liabilities incurred by the business.
The simplicity of a sole proprietorship makes this form of business structure extremely popular among small businesses, freelancers, and other self-employed individuals. What begins as a sole proprietorship may be transformed into another, more complex business structure, such as a corporation, if the business grows substantially and begins hiring a sizeable number of employees.
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