What are the advantages and disadvantages of sole proprietorship form of business?


As sole proprietorship form of business ensures the presence of a single person who acts in the capacity of owner, financer and manager, it has a number of advantages to its credit. These are:

  • Going it Alone - How to Manage as a Sole Proprietor |

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    Its formation is very easy as it does not involve compliance of lager formalities.

  • It facilitates maintenance of secrecy in business operation.
  • It ensures quick decision and flexibility in operation.
  • It ensures effective control and supervision.
  • It reduces cost of production and it has developed a state of inherited goodwill.
  • It is of national importance and ensures many tax advantages.


Despite of many advantages to the credit of sole proprietorship, this form of business organization is not free from limitations. The followings arte some of important limitations:

  • Unlimited liability ensures attachment of personal property to meet claims of outsiders.
  • It has limited financial resources and there is uncertainty with regard to duration.
  • It has limited managerial ability and has restricted growth.
  • This form of business ensures monotony and hard work.
  • It is mostly unsuitable for large scale production.
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