Question

What do you understand by a.sole proprietorship firm? Explain its merits and limitations.

Answer 1

sole proprietorship is s firm in which only one person is the owner.
merits.
. the owe have right to take decision
.all the profit taken by owners
.
demerits
.if the owner does the firm will alsi close
.limited capita
.no growth of firm
.limited liability

Answer 2

Income and losses are taxed on the individual's personal income tax return. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

Merits/Advantages of Sole Proprietorship:

1. Ease of formation and dissolution

2. Simplicity of operation and flexible management

3. Sole claim on profits

4. Favourable credit standing

5. Preferential treatment by Government


Limitations:

The main disadvantages to being a sole proprietorship are: Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company. ... Difficulty in raising capital: Imagine your business in five years.


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