Question

Which of the following is considered the greatest disadvantage to forming a business as a proprietorship?...

Which of the following is considered the greatest disadvantage to forming a business as a proprietorship?

a. The company can only have 100 owners.

b. A proprietorship has too many common stockholders.

c. The amount of profits a proprietorship can earn is limited by law.

d. State regulations is difficult to establish (set up) such a company.

e. The owner has unlimited liability for the debts incurred by the business.

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Answer #1

Option (e) : The owner has unlimited liability for the debts incurred by the business.

Explanation:

~ One of the forms of starting a business can be a Sole Proprietorship. Under this form, there is only a single owner and decision-maker who runs down the business.

~ Under this form, the legal entity of the business is not separated from the identity of the owner, in the eyes of law. In simple words, it means that in case of a business failure, the owner is personally liable for all the unpaid debts of the business.

~ Hence, this is a major disadvantage of this particular form of running a business.

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