Question

A key reason most sole proprietorships remain relatively small is that:

a. they have limited ability to raise funds needed to finance growth.
b. the owners often disagree about the need to take on additional risk associated with growth.
c. government regulations limit their ability to expand into new areas of business.
d. their stockholders would rather receive dividends than have earnings reinvested to finance growth.

Answer 1

A. They have limited ability to raise funds needed to finance Growth

Step-by-step explanation:

What is a Sole Proprietorship

A sole proprietorship represents a business that owned and run mostly by an individual who has the responsibility of paying income tax on any profit generated by the business. Sole Proprietorship is also a very popular form of business around the world.

Characteristics of a Sole Proprietorship

• It is usually owned by an individual who is responsible for its profits as well as its risks
• Sole Proprietorships are easy to set-up due to its simple management and ownership structure
• Due to the singular ownership decision making is limited to the capacity of the owner
• Since it is unincorporated, a sole proprietorship has limited access to capital for expansion such as gearing and the stock market option of getting shareholders. As such, the capital of a sole proprietorship is limited to personal savings, borrowing based on limited collateral, grants and gifts from friends and family.