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:


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.


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. provides full fledged comprehensive tax planning service wherein we suggest the best investment and tax saving plans, which would minimize your total tax on income.

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