Question

Gagan runs a garment shop in a mall two years back he had taken a loan of 20 lakhs from HDFC bank for the renovation of his shop however due to his poor health for the past one year his earning have reduced considerably as he is not able to sell off his shop In context of the above case (a) indentify the limitation of sole proprietorship form of business organization being discussed above. (b) describe briefly any three other limitations of the same form of business organization.

Answer 1

Answer:a)

Explanation:

Full control on ownership

Own boss

Take decisions by him/herself

Answer 2

(a) The limitation of the sole proprietorship form of the business organization being discussed above is the unrestricted personal liability of the owner

• The owner's unrestricted personal liability is one of a sole proprietorship's main drawbacks.
• The owner's fortune and future business possibilities may both be destroyed if the company fails.

(b) Three other limitation of the sole proprietorship form of business organization is as follows:

Restricted Capital:

• The restricted capital available to a sole proprietor is another issue.
• The amount he can borrow from his savings might not be sufficient to grow the company.
• Additionally, financial institutions like banks are hesitant to lend to sole proprietorships.

Completely dependent on the sole owner:

• A sole proprietorship's life cycle is undetermined and dependent on its owner.
• The business may suffer from an incapacitated owner, and it could even result in the closure of the company.
• Without its owner, a lone proprietorship cannot continue.

Limited managerial ability:

• Additionally, a lone proprietor has minimal managerial skills.
• He is not capable of being an authority in every area of the industry.
• Additionally, a lack of resources can prevent him from employing capable individuals to assist him.
• As a result, poor management and choices may hurt the company.

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