Final answer:
The liability of an individual proprietor in a sole proprietorship is unlimited. This exposes the owner's personal assets to business debts and legal challenges. Different business entities like limited liability partnerships and corporations offer protections for personal assets against business liabilities.
Option 'C' is the correct.
Step-by-step explanation:
The liability of an individual proprietor is unlimited. This is a characteristic of a sole proprietorship, where the owner and the business are legally considered the same entity. In a sole proprietorship, there is no legal distinction between the owner's personal assets and the assets of the business. Therefore, the proprietor is 100% responsible for all debts and obligations of the company.
This means if the company incurs debt or faces legal action, the owner's personal assets such as home, car, and personal bank accounts may be at risk to satisfy the business's liabilities.
On the other hand, structures like a limited liability partnership (LLP) or a corporation offer protection for personal assets. An LLP limits the liability to the investment made into the company, and in a corporation, shareholders' liability is limited to their share of investment. These frameworks provide differing levels of protection against losing personal assets.
When deciding on a business structure, it is crucial to consider these aspects of liability. Sole proprietorships offer the simplicity of being the sole decision-maker with all profits directed to the owner.
However, the trade-off is the exposure of personal assets to business risks, unlike in corporations or LLPs. Incorporation remains attractive for entrepreneurs seeking to limit personal liability while maintaining profit and control over their business, which fueled industrial growth and job creation.