Which of the following can be a disadvantage of a Sole Proprietorship?

A sole proprietorship is a business structure where an individual owns and operates the business independently. One of the main disadvantages of this structure is that the owner has personal liability for the debts and obligations incurred by the business. This means that if the business faces financial difficulties or legal issues, the owner's personal assets, such as savings, property, or other valuables, could be at risk to satisfy business debts.

This level of personal liability contrasts with other business structures like corporations or limited liability companies (LLCs), where owners typically have limited liability protection. In those structures, personal assets are often protected from business liabilities, making it a safer option for entrepreneurs who want to mitigate personal financial risk. Therefore, the personal liability associated with a sole proprietorship stands out as a significant disadvantage, as it places the owner in a vulnerable position.

While easier tax reporting and full control over business decisions are generally considered advantages of a sole proprietorship, they do not counterbalance the significant risk posed by personal liability. Similarly, while greater access to funding might be a benefit seen in larger business structures, sole proprietors often struggle with obtaining funding due to perceived higher risks by lenders.