Question

The principal disadvantage of a sole proprietorship is that it is hard to set up.

A) It is hard to set up.
B) Limited access to capital.
C) Tax complexities.
D) The owner is personally responsible for business losses.

Answer 1

The principal disadvantage of a sole proprietorship is that the owner is personally responsible for business losses. Option D is correct.

Step-by-step explanation:

The principal disadvantage of a sole proprietorship is that the owner is personally responsible for business losses. This means that if the business incurs debts or faces lawsuits, the owner's personal assets can be at risk.

Unlike other types of business organizations, such as corporations, sole proprietorships do not offer limited liability protection. This can make it risky for the owner, as they bear all the financial responsibilities and liabilities of the business.

So Option D is correct.