What is one of the hardships of a sole proprietorship?

Capital is limited to owners savings and bank loans

Right on! Give the BNAT exam to get a 100% scholarship for BYJUS courses

It has to complete too many registration formalities

No worries! We‘ve got your back. Try BYJU‘S free classes today!

As they are government owned there is no profit motive

No worries! We‘ve got your back. Try BYJU‘S free classes today!

More tax is charged on them

No worries! We‘ve got your back. Try BYJU‘S free classes today!

Open in App

Solution

The correct option is A Capital is limited to owners savings and bank loans
A business which is owned and managed by a single person is called as sole proprietorship. As the owner is a single person he/she has limited capital with him/her to invest in the business. Hence, it is one of the hardships of a sole proprietorship. The limited capital might be due to very low internal sources of finance and/or banks or other external sources of finance will also be unavailable.

Suggest Corrections

Similar questions

Public sector banks are those in which the government has a major stake and they usually need to emphasise on ___________ objectives than on profitability.

Fill in the blanks:

(i) Majority of the credit needs of the __________households are met from informal sources.

(ii) __________costs of borrowing increase the debt-burden.

(iii) __________issues currency notes on behalf of the Central Government.

(iv) Banks charge a higher interest rate on loans than what they offer on __________.

(v) __________is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Q. Answer is Yes or No:
(a) The sole proprietor is the exclusive master of his business.
(b) The liability of a sole proprietor is limited.
(c) A sole proprietorship has no legal existence apart from its owner.
(d) Sole proprietorship is the oldest form of business organisation.
(e) It is difficult to set up a sole proprietorship.

Q. A large number of the branches of banks have been set up in the villages. The main purpose of setting up these banks is to develop the habit of saving among the villagers and to gives loans to the farmers for boosting the production in one or the other way. So far, banks had been concentrated in the big cities and Indian villagers had no faith in them.
The new banks also intend re- channel bank credit from the big industries to small sectors. With the intention to promote rural banking, Regional Rural Banks were established. These aligned the local field with the rural problems. These banks are not to replace the other credit giving bodies but to supplement them. The Steering Committee of the Regional Rural Banks considered some structural changes. First, they gave thought to the staffing spectrum, then to effective coordination among banks- rural cooperatives and commercial, and the possibility of bringing credit within the access of weaker sections. They wanted to recruit the staff for the rural banks at lower salaries. But this type of discrimination would have been dangerous. Therefore, it was given up.
Another problem with regard to the rural banks is the credit worthiness of the poor. Indian farmers are so poor that they cannot pay back their loans. The rural Indian surveys it quite clear that practically they have no credit worthiness. Their socio-economic mobility is almost zero. Long age in Ranchi the Government experimented with the idea of advancing loan but the experiment failed, That is why the banks used to fear that their credit would never be paid back.
Another difficulty for the rural banks is that loans cannot be processed so easily. Processing loans will also entail heavy expenditure. This is also going to affect their financial position. Still the establishment of the rural banks has been decided because the social advantages are more important than the commercial consideration.
Rural banks will definitely encourage savings. No doubt villages do not have to pay income tax and they get many other concessions, yet their saving is not significant. Despite all these hurdles rural banking system will boost up the economy of villages, and so the economy of the country.
Q. Which of the following is/are purpose/s of setting up banks in rural areas
I. Replacing other credit-giving body
II. Giving loans to farmers
III. Increase the amount of savings of villagers.

Q. One of the hardships of a sole proprietorship is that _________________.

Join BYJU'S Learning Program