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Difficulty: EasySole Proprietorship: Features, Capital Sources, Merits, and Demerits

In a sole proprietorship, the owner has unlimited liability, meaning their personal assets can be seized to settle business debts if the enterprise becomes insolvent.

Answer: Answer

Answer

The statement is True.
The assertion accurately states a fundamental feature of a sole proprietorship: because there is no legal distinction between the business entity and the owner, the proprietor bears unlimited financial liability for all debts.

Step-by-Step Solution

1
Examine the legal relationship between a sole proprietor and their business.
Under commercial law, a sole proprietorship lacks corporate personality and is legally identical to its owner.
Without a separate legal entity, all business liabilities are directly attributable to the individual owner.
2
Evaluate the financial consequence of business failure on the owner's personal wealth.
Personal assets are legally at risk to liquidate unpaid business debts.
This total financial responsibility defines the core concept of unlimited liability.

Key Concept

Unlimited Liability in Sole Proprietorship
Estimated Time:45s
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Topics

Sole Proprietorship: Features, Capital Sources, Merits, and Demerits

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