In a sole proprietor ownership, if business assets are not enough to pay business debts, then personal assets, such as the sole proprietor's house, personal investments, and retirement plans can be used to pay the debt. This is called ________.
A)unlimited liability
B)limited liability
C)non-liability
D)double taxation

Question

Quizplus · Accepted Answer

In a sole proprietorship, the owner has unlimited liability, which means there is no separation between personal and business assets. As a result, if the business is not able to pay its debts, the owner's personal assets can be used to satisfy those debts. This is a major disadvantage of sole proprietorships and why many entrepreneurs choose to establish their businesses as LLCs or corporations to limit their personal liability.

In a Sole Proprietor Ownership, If Business Assets Are Not