Explain any four demerits of Sole Trading Concern.

1. Limited Capital : The sole trader is the only owner of business. He alone contributes capital for business. Capital is in the form of savings and borrowings from friends and relatives. In his individual capacity he cannot raise loans from banks to a large extent. The growth and expansion of business is affected because of limited capital. This is disadvantage to business.

2. Limited Managerial Ability : There is only one person to manage business. Inspite of his knowledge, the sole trader is not able to manage business efficiently. The sole trader may not be an expert in all fields like finance, advertising, management etc. Therefore, management ability is limited.

3. Unlimited Liability : The liability of the sole trader is unlimited. There is no difference between personal property and business property of sole trader. But unlimited liability prevents further expansion. He does not take risk in business. He is overcautious in taking decision which affects progress of business.

4. No Stability : A sole trading concern does not have a continuous existence. It does not have a stable life. Life of the organisation depends upon the life of the sole trader. In case the sole trader dies, becomes insolvent or insane the business has to be closed down.