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What is a disadvantage of a sole proprietorship?

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Question: What is a disadvantage of a sole proprietorship?

Options:

  1. Full control over business decisions
  2. Limited access to capital
  3. Simplicity in tax filing
  4. Direct profit retention

Correct Answer: Limited access to capital

Solution: 

Sole proprietorships often have limited access to capital compared to other business forms.

What is a disadvantage of a sole proprietorship?

Practice Questions

Q1
What is a disadvantage of a sole proprietorship?
  1. Full control over business decisions
  2. Limited access to capital
  3. Simplicity in tax filing
  4. Direct profit retention

Questions & Step-by-Step Solutions

What is a disadvantage of a sole proprietorship?
  • Step 1: Understand what a sole proprietorship is. It is a business owned and run by one person.
  • Step 2: Recognize that sole proprietors use their own money to fund the business.
  • Step 3: Compare this to other business types, like partnerships or corporations, which can get money from multiple investors.
  • Step 4: Realize that having only one owner means there are fewer sources of money available.
  • Step 5: Conclude that this limited access to funds can make it harder for sole proprietorships to grow or cover expenses.
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