Demerits or Disadvantages of Sole-Proprietorship

A sole proprietorship suffers from the following disadvantages:

1) Unlimited Liability:

The most important drawback of the sole proprietorship is the burden of unlimited liability. The debts of business are considered as owner’s personal debts. Not only his business property but also his personal property is liable to pay his business debts.

2) Limited Managerial Ability:

It is not possible for one man to be an expert in all matters of business due to limited ability to manage his business affairs. Thus, the growth of the business is restricted in sole proprietorship by this.

3) Limited Capital:

The resources of a person are limited and the amount possible to be borrowed also has some limits. This reason makes the size of the business small and the expansion of the business beyond a point becomes impossible in sole proprietorship.

4) Uncertain Duration:

In sole proprietorship, any uncertain event in the life of the owner is sure to disturb the smooth running of the business. The business ends with the disability, insolvency, death and insanity of the owner.

5) Limited Supervision:

A sole proprietor however qualified and clever will find it hard to supervise the work of his sub ordinate beyond a certain limit e.g. in ease of large general store owned by single person, it will be difficult for the owner to keep an eye on all the departments and employee and to ensure that the customers are treated nicely. The problems will be more acute if store has its branches in other places.