Menu
- 4 Marks
Question
It appears that many Ghanaians prefer to own their businesses without going through the cumbersome details of forming an incorporated company limited by shares.
Required:
State TWO (2) advantages and TWO (2) disadvantages of forming sole proprietorship. (4 marks)
Answer
Advantages of forming a sole proprietorship:
- Simplicity: It is simple, inexpensive, and allows the business to legally commence operations before the business name is registered.
- Flexible working time: The proprietor has the flexibility of working time.
- Profit retention: The proprietor enjoys all the profits generated by the business.
- Business transfer: The proprietor can purchase or sell a business, including its assets such as inventory, plant machinery, and landed property.
(2 points @ 1 mark each = 2 marks)
Disadvantages:
- Limited access to credit: Obtaining loans and credit to run the business is more difficult for a sole proprietorship.
- Personal liability: The owner’s personal liabilities are not distinct from the business liabilities.
- Business continuity: Sole proprietorships hardly survive the death of the proprietor.
- Health and life dependency: The health and life of a sole proprietorship business are inevitably linked to that of the proprietor.
(2 points @ 1 mark each = 2 marks)
- Uploader: Dotse