(i)    Limited Capital. The financial resources which a sole trader can raise are limited. He can depend on his personal resources and his borrowing capacity. The borrowing capacity depends on his assets and credit worthiness. The limitation of financial resources may put hurdles in the expansion of the business.

(ii)    Limited Managerial Skill. All the managerial functions which are essential for the successful operation of a business are performed by the sole trader. Thus benefits of specialization are not available. Moreover, the individual may not be able to perform all the managerial functions effectively because of limitations of time, skills enemy and imagination.

(iii)    Unlimited Liability. The liability of the sole trader is unlimited in the sense that the business creditors can even recover their debts form the personal assts of the proprietor. The proprietor may be completely ruined in case failure of his business. This factor puts a ceiling on the growth and expansion of the business.

(iv)    Uncertainty. There is wide uncertainty about the continuity of the business because the sole trader operates on a small scale and his activates are less diversified. The owner may be compelled to close his business in which he concentrates. Moreover, death and inanity of the proprietor also lead to closure of business. In short, business sinks and swims with the proprietor.

(v)    Limited Opportunities. Since the scale of operations is relatively small, the sole trader cannot avail the benefits of all business opportunities.

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