Question

A proprietorship has three important advantages: (1) It is easily and inexpensively formed, (2) it is subject to government regulations, and (3) it is subject to lower income taxes than are . However, a proprietorship also has three important limitations: (1) A proprietor has personal liability for the business' debts. (2) The life of the business is limited to the life of the individual who created it. (3) A proprietorship has difficulty obtaining large sums of capital so proprietorships are used primarily for small businesses.

Answer 1

Answer:

A proprietorship has three important advantages:

(1) It is easily and inexpensively formed,

(2) it is subject to few government regulations, and

(3) it is subject to lower income taxes than are corporations.

However, a proprietorship also has three important limitations:

(1) A proprietor has personal liability for the business' debts.

(2) The life of the business is limited to the life of the individual who created it.

(3) A proprietorship has difficulty obtaining large sums of capital so proprietorships are used primarily for small businesses.

As all company structures, proprietorships have both advantages and disadvantages. Although the advantages mainly relate to feasibility, the disadvantages are often overlooked. The main disadvantage is the total liability of the owner, which is detrimental if the business faces tough times, which lead to liquidation.