Question

Which of the following is typically considered a disadvantage of sole proprietorships? Multiple Choice Income taxes are paid by both the business and its owner. The business is considered a separate legal entity from its owner. Owner is personally liable for all debts of the business. Establishing the business usually requires legal assistance.

Answer 1

Answer:

The answer is: Owner is personally liable for all debts of the business.

Explanation:

Sole proprietorship is the oldest type of business, where a single person is the owner of a business.

Some of the advantages of sole proprietorship are:

• the simplest and most flexible business structure.
• owner has complete control and full decision making powers
• easy to close down the business
• profits are taxed at the owner´s tax rate

Some of the disadvantages of sole proprietorship are :

• owner is personally liable for all debts of the business .- if the business goes bankrupt, usually the owner does also
• death or illness of the owner will lead to the end of the business.
• difficulties in raising capital from outside sources