Limitations of sole proprietorship and partnership forms of business organization
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LIMITATIONS of SOLE PROPRIETORSHIP
✴Limited resources: Resources of a sole proprietor are limited to his /her personal savings and borrowings from others.
✴Limited life of a business concern: The sole proprietorship business is owned and controlled by one person, so death,insanity, imprisonment or bankruptcy of a proprietor affects the business and can lead to its closure.
✴Unlimited liability: A major disadvantage of sole proprietor is unlimited liability. If the business fails,the creditors can recover their dues not merely from the business assets but also personal assets.
✴Limited managerial ability: The owner has to assume the responsibility of purchasing, selling, etc. Thus decision making may not be balanced in all the cases.
LIMITATIONS of PARTNERSHIP
✴Unlimited liability: Partners are liable to repay debts even from their personal resources in case the business asseyare not sufficient.
✴Limited resources: There is a restriction on the number of partners, hence contribution in terms of capital investment is usually not sufficient to support large scale business operations.
✴Possibility of conflicts: Partnership is run by many people so there is difference in opinions of people which can lead to conflicts and disputes between partners.
✴Lack of continuity: Partnership comes to an end with the death,retirement, insolvency of any partner .It may result in lack of continuity.
✴Lack of public confidence: A partnership firm is not legally required to publish its financial reports .It is ,therefore, difficult for any member of the public to ascertain the true financial status of partnership firm .As a result, the public confidence in partnership firms is generally low.
⭐Hope it helps⭐
LIMITATIONS of SOLE PROPRIETORSHIP
✴Limited resources: Resources of a sole proprietor are limited to his /her personal savings and borrowings from others.
✴Limited life of a business concern: The sole proprietorship business is owned and controlled by one person, so death,insanity, imprisonment or bankruptcy of a proprietor affects the business and can lead to its closure.
✴Unlimited liability: A major disadvantage of sole proprietor is unlimited liability. If the business fails,the creditors can recover their dues not merely from the business assets but also personal assets.
✴Limited managerial ability: The owner has to assume the responsibility of purchasing, selling, etc. Thus decision making may not be balanced in all the cases.
LIMITATIONS of PARTNERSHIP
✴Unlimited liability: Partners are liable to repay debts even from their personal resources in case the business asseyare not sufficient.
✴Limited resources: There is a restriction on the number of partners, hence contribution in terms of capital investment is usually not sufficient to support large scale business operations.
✴Possibility of conflicts: Partnership is run by many people so there is difference in opinions of people which can lead to conflicts and disputes between partners.
✴Lack of continuity: Partnership comes to an end with the death,retirement, insolvency of any partner .It may result in lack of continuity.
✴Lack of public confidence: A partnership firm is not legally required to publish its financial reports .It is ,therefore, difficult for any member of the public to ascertain the true financial status of partnership firm .As a result, the public confidence in partnership firms is generally low.
⭐Hope it helps⭐
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