Question

What are the disadvantages of the Sole trading business?

Answer 1

1. Limited Capital:
Since the capital is contributed by one individual only, business operations have necessarily to be on a limited scale.

2. Limited Managerial Skill:
A single person’s intelligence and experience may not help him beyond a certain stage. Since he has to focus on each and every activity, his managerial ability is bound to be limited.

3. Unlimited Liability:
The creditors have the right to recover their dues even from the personal property of the proprietor in case the business assets are not sufficient to pay their debts.

4. Lack of Specialisation:
Since the business unit is small and the financial resources are limited, experts in different fields cannot be employed to secure maximum advantages.

5. Hasty Decisions:
The sole proprietor is more likely to take the hasty decision as he need not consult anybody else.