Question

Max chose to operate his production studio as a sole proprietorship even though his attorney cautioned that he was:____________

a. reducing its overall profit potential.
b. increasing his taxable income.
c. exposing himself to unlimited personal liability.
d. violating an existing partnership agreement.

Answer 1

c. exposing himself to unlimited personal liability.

Step-by-step explanation:

One major characteristic of sole proprietorship being the individual is sole recipient of profits and sole bearer of all risks and liabilities.

A sole proprietor bears unlimited liability in the sense that, in case of bankruptcy, the proprietor's personal assets can be taken away to repay debts owed by him.

Though a proprietor also remains the sole recipient of all gains, similarly the proprietor is also exposed to unlimited risk.

Thus, the correct option is, c. exposing himself to unlimited personal liability .