The Major Disadvantage of Sole Proprietorship

Understanding the Major Disadvantage of Sole Proprietorship

A sole proprietorship is a business owned and operated by a single individual. While there are several advantages to this type of business structure, there are also some significant disadvantages to consider.

One major disadvantage of the sole proprietorship is that the owner is personally liable for the business's debts and obligations. This means that the individual owner is responsible for any debts incurred by the business and can be held personally liable in case of any legal issues or lawsuits.

Unlike other business structures such as corporations or limited liability companies (LLCs), where the owners' personal assets are typically protected from business liabilities, a sole proprietorship does not provide this separation. As a result, the owner's personal finances and assets are at risk if the business faces financial difficulties or legal challenges.

Final answer:

The major disadvantage of a sole proprietorship is that the owner is personally liable for the business's debts and obligations, potentially risking personal assets. Therefore, the correct option is D.

Explanation:

A major disadvantage of the sole proprietorship is d. the sole proprietor is personally liable for the debts of the sole proprietorship. In a sole proprietorship, the business is not a separate legal entity from the owner, meaning all debts and legal obligations of the business fall on the individual. If the business fails or is sued, the owner's personal assets are at risk. This contrasts with other business structures, like corporations, where liability is limited and the entity is separate from its owners.