Which of the following is a disadvantage of a sole proprietorship?
A)The owner is personally liable for the debts of the firm.
B)The firm is subject to double taxation.
C)The profits of the firm have to be shared between its members.
D)The costs of formation of the firm are more compared to other business forms.

Question

Quizplus · Accepted Answer

The biggest disadvantage of a sole proprietorship is that the owner is personally liable for the debts and lawsuits against the business. This means that the owner's personal assets, such as their home or car, may be at risk if the business incurs substantial debts or legal liabilities. However, there is no sharing of profits with other members, and the costs of formation are relatively low compared to other business forms. Double taxation is not a concern for sole proprietorships, as they are taxed as pass-through entities.

Which of the Following Is a Disadvantage of a Sole