Sole proprietorship business – Advantages and disadvantages. On a general note, an entrepreneur can start his own business through the formation of Sole proprietorship business. The pros and cons attached to this form of business have been stated below:

Advantages:

·         Easy formation: No legal formalities are involved for setting up the business as compared to other forms of organization. With certain amount of funds, an entrepreneur can start his business.

·         Better control: There is a direct relationship between ownership and management in case of sole proprietorship firm. Hence, the operations will be under the vigilance of the owner, resulting in better efficiency.

·         High motivation: As the owner will be responsible for all the risks of the firm because of unlimited liability, he would be motivated to manage the business more efficiently and effectively.

·         Scope for personal touch: Since the scale of operations is small and the employees would work under direct supervision of the owner, there is scope for personal relationship with the customers.

·         Government control: Regulated laws are almost negligible in its formation, day-to-day operation and dissolution.

·         Secrecy: Unlike companies, books of a sole proprietorship business are not required to be disclosed mandatory for public inspection. Hence high level of secrecy can be maintained within the organization.

 

Disadvantages:

 

·         Limited resources: The financial resources are generally limited because such firms are financed by personal resources of owner. Hence it acts as a hindrance in the growth of a firm.

·         Concept of Unlimited liability: This implies that the liability of a sole proprietor is unlimited and in case of loss, even if personal property can be attached to meet external liabilities.

·         Less scope for economies of large-scale: Due to limited resources and the concept of unlimited liability, there is less scope of expansion for a sole proprietorship as compared to any other form of organization.

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On a general note, an entrepreneur can start his own business through the formation of Sole proprietorship business. The pros and cons attached to this form of business have been stated below:

Advantages:

·         Easy formation: No legal formalities are involved for setting up the business as compared to other forms of organization. With certain amount of funds, an entrepreneur can start his business.

·         Better control: There is a direct relationship between ownership and management in case of sole proprietorship firm. Hence, the operations will be under the vigilance of the owner, resulting in better efficiency.

·         High motivation: As the owner will be responsible for all the risks of the firm because of unlimited liability, he would be motivated to manage the business more efficiently and effectively.

·         Scope for personal touch: Since the scale of operations is small and the employees would work under direct supervision of the owner, there is scope for personal relationship with the customers.

·         Government control: Regulated laws are almost negligible in its formation, day-to-day operation and dissolution.

·         Secrecy: Unlike companies, books of a sole proprietorship business are not required to be disclosed mandatory for public inspection. Hence high level of secrecy can be maintained within the organization.

Disadvantages:

·         Limited resources: The financial resources are generally limited because such firms are financed by personal resources of owner. Hence it acts as a hindrance in the growth of a firm.

·         Concept of Unlimited liability: This implies that the liability of a sole proprietor is unlimited and in case of loss, even if personal property can be attached to meet external liabilities.

·         Less scope for economies of large-scale: Due to limited resources and the concept of unlimited liability, there is less scope of expansion for a sole proprietorship as compared to any other form of organization.