Briefly explain the drawback associated with being a sole proprietor a

QUESTION

Briefly explain the drawback associated with being a sole proprietor and having limited financial resources and few fringe benefits.

What will be an ideal response?

ANSWER

Answer: Sole proprietors don’t have much borrowing power as they are usually limited to the owner’s personal credit limit. In addition, fringe benefits such as vacation pay, sick leave, health benefits, and pension plans may or may not be available since they are paid out of revenues and there may not be anyone else who can cover the business in the event someone wants to go away on vacation or just isn’t feeling well enough to go to work.
Explanation: Most sole proprietorships are small scale, which means they have limited financial resources. They also don’t have the borrowing power of large organizations and are frequently limited to the owner’s personal credit. In addition, the kind of fringe benefits, such as vacation pay, sick leave, health benefits, and pension plans, which provide benefits beyond base wages and which you might be used to having in large organizations, may be few or nonexistent since they have to be paid out of whatever revenues you make.