Final answer:
The growth of sole proprietorships and partnerships is typically limited by their ability to raise capital and by the personal liability that owners must assume, which can jeopardize personal assets in adverse situations.
Step-by-step explanation:
The growth of both sole proprietorships and partnerships is frequently limited by the firm's ability to raise capital. Sole proprietorships, being owned and operated by an individual, face challenges in raising money to establish or expand the business due to one person's limited resources. Similarly, while partnerships can raise more capital than sole proprietorships because they involve more owners, they too have limitations when compared to larger, incorporated businesses.
Additionally, both business structures are subject to personal liability. This means that in the event of bankruptcy or lawsuits, the personal assets of the owners may be at risk. Sole proprietorship owners face unlimited liability, and in a partnership, each partner may be held responsible for the debts and obligations of the company.
These factors present significant challenges when considering the growth potential of sole proprietorships and partnerships compared to corporate structures, which offer limited liability to their owners and greater access to capital markets.