There are limitations to sole proprietorship and they are as follows:
Limited Resources: The resources are limited to the level of money saved and borrowed by the proprietor and not more than that. Banks and other lending institutions hesitate to lend to sole proprietors and this may be the reason as to why the business remains small and with less growth.
Limited Life of the Business: Death or insolvency from the proprietor leads to the business being closed since as per the law.
Unlimited Liability: The liability of the business lies with the owner and it is unlimited. The assets of the business as well as the personal assets of the owner are considered by the creditors. The financial burdens falls on the owner totally forcing him not to be a high risk taker or a decision to expand.
Limited Ability to Manage: The owner is responsible for all managerial activity such as purchasing, selling, financing etc. No individual can be proficient in all the fields. Due to the shortage of resources, there may be constraints from the owner's side to recruit talented people.
Though there may be certain limitations, we can find sole proprietors in business due to the advantages and less capital. This is suitable for business done on a small scale.
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