Which one of the following statements is correct with respect to sole proprietorships?
A) The sole proprietor has limited liability.
B) The sole proprietor need not adhere to any licensing and government regulations.
C) The sole proprietor must consult with the other owners before making any major decisions regarding the business.
D) The sole proprietor has the same extent of liability as a shareholder.
E) The sole proprietor is responsible for the torts committed by an employee that take place during the course of business.

Question

Quizplus · Accepted Answer

Sole proprietorships do not offer limited liability to the owner; instead, the sole proprietor is personally responsible for all the debts and obligations of the business. This includes being responsible for any torts committed by employees during the course of business operations. Choices A, B, C, and D are incorrect because they either misrepresent the nature of sole proprietorship liability, suggest a need for consultation not applicable in sole proprietorships, or incorrectly compare the liability to that of a shareholder.

Which One of the Following Statements Is Correct with Respect