The disadvantages of sole proprietorship business

                   INTRODUCTION 

The sole proprietorship is a business that is advantageous; it is easy to start and manage, which makes it an enticing venture to go into. But it is also not void of disadvantages; the challenges the proprietor would encounter while running the business. It is not a business you should jump into without considering the challenges to know if you can bear it. It is advisable for you to go into the business only if you think that it's advantages outweighs it's disadvantages.

   DISADVANTAGES OF SOLE PROPRIETORSHIP 

            1. PROBLEM OF CONTINUITY 

If the owner dies, the business may also stop to exist. This is especially when there is no successor to continue the business. If there were other shareholders, then they could continue the running of the business if one of the owners die. But in sole proprietorship, the chances that a business would continue if the owner dies, is very less or little.

What can we liken sole proprietorship to, of all the entities on the earth?  

One thing that it is perfectly like is a childless man. A man without a child. If a man gives birth to a child, that child would give birth to another, and they would continue his lineage. But if he has no children and dies, his lineage would also die. And so is it with business. Shareholders are like the children of a man. When one man who is a shareholder dies, others would continue the business. This helps to ensure the continuity of the business. But sole proprietorship is not like that. Usually when the proprietor fades away, like a tree uprooted from the ground, the business fades away. 

                    2. BAD DECISIONS 

We all know that sometimes when we give a judgment and share it with others, they may point out the flaws in it. We are not always right. Thus we need others to help us make judgement. If the sole proprietor has no good sense of judgment he is likely to take a wrong decision which would affect the business. There is no one else with a better opinion and no one else to draw out the flaws in his decisions. He could make fast decisions, yes, but the decisions when they are not the best, may lack someone to draw his attention to it. Sometimes the best of decisions are made when people come together to introspect on matters. Since there is no one else, the faulty reasoning or judgement of the proprietor may lack opposition. When many are involved in decisions, those involved would benefit from the various intellectual strength and diverse perspective of everyone else. But the proprietor has sovereignty over decisions. No one else is there to make judgement with him. Weather or not he is right or wrong he may not know until the decision affects his business. Even the Bible said, ''Two heads are better than one''. 

    3. LACK OF LIABILITY PROTECTION 

 In law, there is no difference between the owner- sole proprietor and the business itself. Due to the fact that they are not mandated by law of their country to register  they do not get the protection that is due legal business entities; they do not get certain legal protection and benefits. 

To explain better one of those benefits, take the Limited Liability Companies as an instance. The laws of most countries offer protection that restricts their customers from suing them directly and seizing their properties in the even of differences. For sole proprietorship this is different. It is contrary. Their customers are not restricted from suing them directly. They could. So if the proprietor is sued directly, he would not commit the time he is supposed to commit to the running of the business to attending of court cases, which would affect the business negatively. If their occurs an incidence where the business incurs debts, they could  seize his property, as their is no particular law that protects them. And if it is an important property to the business like production equipment that is seizes, it would mean that production would not take place, until it is released. 

The business cannot be sued or sued in its own right. When you sue the business, you have sued the owner. As such when He is supposed to be attending to his business He would be attending to court cases.

  4. RISK IS BEARED ONLY BY THE PROPRIETOR 

Business involves risk. It involves uncertainties and challenges. It is a human field after all. It is like a road. When a team engage in plying a route, they would share the risks together. They know that whatever occurs would affect everyone of them. It is as if to say everyone would share a percent of the risk. But if it is only an individual he would share it only him. Thus anything that would occur would affect him. This knowledge alone is not even pleasant because what the person might encounter might over power him. But when there are many shareholders the risks would have to be shared by them. 

        5. LACK OF SPECIALIZATION 

 The proprietor is personally involved in every aspect of the running of the business. He is involved in every department; administration, production, name them. And he may not be very adept or skilled at doing everything he does. He may be good at producing his foods, but is not good at selling them. This may affect his sales. But if many persons were involved, they would all specialize at one aspect of the field where they are very good at. This would help to lessen and even ensure that stress is avoided. The result would be very exceptional. Because people do best when they specialize, as experience have shown.

      6. DIFFICULTY IN RAISING CAPITAL 

If many, were to start a business, they would all contribute to the capital. The money would sum into a huge amount. But where one person only has to contribute to it, the result may be meagre, particularly if he lacks or has less. He may want to resort to loans. But is it even easy to get loan for sole proprietorship? Human experience shows that it is not. 

 If He seek loans, people would hardly want to give him. Most loaners, like banks, have preference for loaning established business; like partnerships and limited liability companies. After all their networth and revenue are higher, they could easily tap from it and repay. Sole proprietorship not having business credit cards and business accounts are not in the best position to incur loan. 

They are usually not favoured by conventional loaners. Sometimes they resort to other personal sources of loan, which is difficult to repay. And when they are not able to, their assets are seized. This record does not put them in good light for consideration as being worthy by loaners. They know they find it difficult to repay loans, so they know if they give them, they may also find it difficult to repay them. 

Sole proprietorship businesses usually gives little or small profits to the user. And their chances of failure are higher. The proprietor may not have set aside money to use for repayment. 

One of the conventional ways of raising capital is through selling of interest or shares. Other business can sell shares. But in sole proprietorship shares cannot be shared; it is a business meant to have only one shareholder- the sole proprietor. 

Since shares cannot be sold, there is thus limitation in the means through which capital could be raised for the business. It is true that there are other means to raise capital, like trading on goods and services, but the non inclusion of one of the ways, which is share selling, limits the means. 

             7. RISK OF HIGH DEPT

The sole proprietor has difficulty in raising capital. This may move him to source loans. He isn't certain that he could repay the loan. Loans even comes with a prize. Loaners attach high interests to loans. Sometimes when he is unable to settle one loan, he may be moved to loan another to repay previous loan. And so would he continue to collect one loan after the other until his debts like up. This would affect the businesses finance. 

8. CUSTOMERS MAY NOT WANT DIRECT TRADING 

The truth is that some customers may have preference for doing business with limited liability companies and partnerships because they prefer the formalities they must pass through, which sole proprietorship is void of. Thus, many not wanting to trade with him to avoid direct contact would not patronize him, leading to reduction in patronage.

       9. HIGH PERSONAL TAXES

The proprietor is exempt from most taxes and fees. But because he is at liberty, he may deduct unnecessarily from his profit to settle for his personal expenses, which may affect business activities.

            10. LIMITED GROWTH

The challenges of raising capital and managing the business could affect the growth othe business. Since management is one of the important factors that affects growth of business, when there is mismanagement, there would be little chances of business growth.

       11. DIFFICULTY IN TRANSFER OF OWNERSHIP 

When the proprietors interest to run the business is no more, and he wishes to bequeath it to another person, the transfer of ownership is difficult. He never certified himself as the business owner. Which document would he hand over to the buyer?