Future Business Leader Achievments (FBLA) Economics Practice Exam

Of the following, the one that is NOT an advantage of the proprietorship form of business is that ________.

1. It is easy to start

2. There is usually pride of ownership

3. The owner has complete control

4. It is relatively easy to raise large amounts of capital

The correct answer is: It is relatively easy to raise large amounts of capital

The choice that is not an advantage of the proprietorship form of business is the ability to raise large amounts of capital. In a proprietorship, the business is owned and operated by a single individual, which typically limits the resources available for funding. The owner can invest personal savings or funds from family and friends, but accessing larger amounts of capital can be challenging. This is largely because creditors may view sole proprietors as higher risk compared to larger business entities, such as corporations, which can issue shares or bonds to raise money. Corporations can attract investments from a wider pool of stakeholders, making it easier to accumulate significant funding. On the other hand, the ease of starting a proprietorship is a clear advantage, as it often involves fewer regulatory hurdles and lower initial costs. Additionally, pride of ownership and complete control are significant benefits for an owner, contributing to personal satisfaction and the ability to make unilateral business decisions. These characteristics highlight the inherent strengths of proprietorships, but they also emphasize the limitations when it comes to obtaining substantial capital.