Question

You would like to start a cellular telephone equipment service business. You are considering organizing the business as a sole proprietorship. Identify the advantages and disadvantages of owning a sole proprietorship. List two advantages of owning a sole proprietorship.

Answer 1

Answer and explanation:

Sole proprietorships are entities where an individual owner is responsible for all the operations of the business. The advantages of establishing sole proprietorships include the low cost to start the business, profits and decisions are not shared, and there is minimal regulation from the government. At the same time, sole proprietorships have disadvantages such as unlimited liability, difficulties raising capital or the fact that the business lacks continuity if the owner is not present.

Answer 2

Answer:

A sole proprietorship is a form of business owned and managed by one person.

Explanation:

Advantages:

1. It involves small capital to set up the business.

2. There is a close relationship between owner and customers which improves personalised product/service delivery.

3. There is privacy in conducting business affairs.

4. All profits accrue belongs to the business owner.

Disadvantages:

1. The sole proprietor bears the risks alone.

2. There is limitation in expansion

3. Unlimited liability in cases of business failure, his assets maybe sold to pay of debts.

The advantages of owing a sole proprietorship are:

1. Ability to manage the business.

2. The low startup cost.