Income Tax Expert Interview Question:

Explain what are the disadvantages of proprietary firms?

Submitted by: Muhammad

1. Unlimited Liability : In such firms the liability of the owner is unlimited as the owner takes more risk to earn more profits and increase the volume of his business by supplying his personal assets to the business.

2. Limited Financial Resources : Being the single owner of the business, the availability of funds from various sources is limited.

3. No Legal Status : The existence of business is due to the existence of sole proprietor. Death or insolvency of the sole proprietor brings an end to the business.

4. Limited Capacity of Individual : An individual has limited knowledge, set of skills due to which his capacity to undertake responsibilities, his capacity to take quick decisions and bear risks are also limited.

5.Transferring of business is not easy in the case of Proprietary Firm.

6. Higher Taxes: As the sole proprietor is the direct person enjoying the profits thus he needs to pay higher taxes.
Submitted by: Muhammad