What is the primary disadvantage of a sole proprietorship?

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Question: What is the primary disadvantage of a sole proprietorship?

Options:

Correct Answer: Unlimited personal liability

Solution:

The primary disadvantage of a sole proprietorship is that the owner has unlimited personal liability for the business\'s debts.

What is the primary disadvantage of a sole proprietorship?

What is the primary disadvantage of a sole proprietorship?

Step 1: Understand what a sole proprietorship is. It is a type of business owned and run by one person.
Step 2: Recognize that in a sole proprietorship, the owner is personally responsible for all the business's debts.
Step 3: Realize that 'unlimited personal liability' means if the business owes money, creditors can take the owner's personal assets (like their house or savings) to pay off those debts.
Step 4: Conclude that this risk of losing personal assets is the primary disadvantage of being a sole proprietor.

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