Question

However, a proprietorship also has three important limitations:

1) A proprietorship has ___ personal liability for the business' debts.
2) The life of the business is limited to the life of the individual who created it and
3) A proprietorship has difficulty obtaining large sums of capital so proprietorships are used primarily for small businesses.

a) Limited
b) Unlimited
c) No
d) Partial

Answer 1

A sole proprietorship has unlimited personal liability for its debts, meaning the owner could lose personal assets if the business cannot pay its debts.

Step-by-step explanation:

A proprietorship has unlimited personal liability for the business' debts. This means that the owner is personally responsible for all the debts and obligations of the company. In a proprietorship, the individual owner assumes full liability which suggests they are 100% responsible financially, and this liability extends to the owner's personal assets which can be used to settle business debts and legal judgments. Additionally, the life of a sole proprietorship is limited to the life of the owner, causing potential instability for the business upon the owner's death or withdrawal, and proprietorships commonly face challenges in obtaining large sums of capital, leading them to be often small-scale operations.