Limitations of Sole Proprietorship

Alongside its advantages, Sole Proprietorship carries some real disadvantages that become more serious as a business grows:

• Unlimited liability — the biggest drawback; if the business fails, the owner's personal property can be sold to clear business debts.
• Limited capital — the business depends mainly on the owner's own savings and personal borrowing capacity, which restricts how much the business can expand.
• Limited managerial ability — one person cannot be an expert in every function (purchase, sales, finance, and so on), so decisions in unfamiliar areas may suffer.
• Limited life of the business — the business is tied to the owner; it may come to an end on the owner's death, prolonged illness, or insolvency. …