Advantages and Disadvantages of Sole Proprietorship or, Advantages of Sole Proprietorship Business is Business Single or sole proprietorship business possesses a number of advantages, which are as follows-
Advantages of Sole Proprietorship Business
- Easy formation: Any person or individual can easily open a proprietorship business. No legal formalities are needed to be carried out.
- Adequacy of small capital: Small amount of capital is sufficient for sole proprietorship business, as ordinary or no establishment is adequate for the operation of any proprietorship business.
- Maintenance of privacy: Privacy plays important role in the success of business. Privacy of business is secrets should be maintained for future success. As proprietorship business is one man business, so privacy maintenance is easy in these types of business. Further, information need not to be disclosed to the tax authority. So privacy maintenance.
- Strict control: Strict control is significant for success and survival of business. The sole owner can apply an overall control over the business and its.
- Low tax implication: The application tax rate in case of proprietorship business is the personal tax, which is lower than the corporate tax rate. By payment of turnover tax and shop tax the can avoid other owner can avoid other tax implication applicable in corporate activities.
- Maintenance of personal contact with numbers: As proprietorship business is a one-man business driven in assistance with the employees’ services, the owner can ensure a personal supervision and maintain a personal relation with the customers individually.
- Easy alteration: The chance of the pattern and the location o the business of sole proprietorship is also very easy and can be done at the absolute discretion of the owner.
- Unique adaptability: Because of small size and swift adaptability proprietorship is unique in some areas and has no competitor from big partnership firms or corporation.
- Quick Decision making and easy implementation: In case of decision making quick decision may be taken in case of proprietorship business and may be implemented easily and swiftly.
- Easy termination: In case of continued losses or bankruptcy. Business needs closed. This termination is very easier in case of proprietorship than that of partnership firms or companies.
Thus sole proprietorship business possesses some unique advantages.
Disadvantages of sole proprietorship Business
Sole proprietorship business also from some disadvantages, which are as follows-
- Small size for business expansion: Usually, sole proprietorship business is of small size. The size of these types of business can’t be extended, because of limited capability and financial strength of the owner. On the other hand partnership firm and company.
- Small Capital: Usually, an individual cannot afford large amount of capital. Because of small capital, proprietorship firm cannot afford capital intensive technology as is possible in case of joint proprietorship, partnership or company.
- Poor Credit Standing: The owner may have to pay more cost for this loan. Because of poor credit standing, the financial institutions may claim more security and charge higher rate of interest.
- Unlimited liability: The liability of the owner of a proprietorship firm is unlimited. Unlimited liability is another disadvantage of sole proprietorship business. In case of loss or bankruptcy, the owner’s personal is also liable for the business debt.
- Limited managerial ability: Another disadvantage of a proprietorship business is that the owner’s possesses limited managerial capability, however efficient he is. The single owner is solely responsible to cater the need of the business and its expansion.
- Poor existence: proprietorship business cannot survive for longer period. The death or personal injuries of the owner may cause a sudden termination of the business.
Thus, proprietorship business suffers from a number of disadvantages.