Question

Mention two limitations of sole proprietorship.

Answer 1

1. Limited Capital: The proprietor’s personal savings and borrowings are the only sources of capital. They may not have enough assets of their own and have a limited ability to borrow. As a result, there is little room for business expansion.
2. Limited Managerial Skills: In a sole proprietorship, one person manages all functions, but it is challenging to have expertise in every area. This leads to a lack of specialization, overburdening of the proprietor, unbalanced decisions, and an inability to hire professional experts.