Darrall is sure he would like to be a sole proprietor of his business, but he knows he should weigh the pros and cons of that decision. What would be a disadvantage of sole proprietorship for Darrell?

Question

A. He would be the only owner and make all the decisions
B. He would be liable or legally responsible for all debts
C. He would be subject to very few government regulations
D. He would be eligible to receive all after-tax income earned in the business

Answer 1

The correct answer is B. He would be liable or legally responsible for all debts.

One of the main disadvantages of a sole proprietorship is that the owner has unlimited liability, meaning that if the business incurs debts or faces legal issues, the owner is personally responsible, which could put personal assets at risk.