Question

If Southwest Development Company is a sole proprietorship owned by Ms.​ Harper,: ​(Select the best answer​ below.) A. Ms. Harper has limited​ liability, which guarantees that she cannot lose more than the​ $25,000 she invested. B. Ms. Harper has limited​ liability, which is the amount of​ $60,000 in unpaid debts. C. Ms. Harper has unlimited​ liability, which means creditors can claim against her personal assets. D. Ms. Harper has unlimited​ liability, which means creditors can only claim against the​ $25,000 she invested.

Answer 1

Ms. Harper has unlimited​ liability, which means creditors can claim against her personal assets

Step-by-step explanation:

A sole proprietorship is owned and managed by one person. The owner makes all the investment decisions, suffers all the losses, and enjoys the profits by themselves. Sole proprietorships are popular due to their ease of start-up and operations.

Legally, a sole proprietorship is not a separate entity from the owner. The assets and liabilities of the business are deemed to belong to the business owner. A sole proprietor has unlimited liability to the obligations of the business. In other words, the law does distinguish between business assets and liabilities and the owner's personal proprieties. Should Mrs. Harper's business fail to pay its obligations, creditors can lay a claim on her assets to recover their money.