Question

CASELET 8: Ajay is the sole owner of a shoe manufacturing factory. He took loan of ₹ 20 lakhsfrom Ace finance company for the expansion of his business. Because of continuous losseshowever, he was not able to repay the loan on time. Assets of the business were not enoughfor repaying liabilities in full. As a result, the finance company asked him to repay their loan.He refused to do so on the ground that the loan was taken by his business and not by him forhis personal use. The company filed a case against him. The court gave decision in favour ofthe company on the ground that Ajay was operating as the sole proprietor and a sole proprietordid not have a separate entity distinct of his own. The court further stated that Ajay hadunlimited liability and held him liable to repay the loan even by selling his personal property,if need be.Identify and explain two features of the form of business organisation formed by Ajay byquoting the lines from the case.​

Answer 1

Hello

Explanation:

(i)- S.ole pr.oprietorship-The s.ole proprieto.rship is the simp.lest bu.siness form under which one can ope.rate a bu.siness. The s.ole pro.prietorship is not a legal en.tity. It simply ref.ers to a person who ow.ns the busin.ess and is person.ally resp.onsible for its deb.ts.

(ii) Unlim.ited liab.ility: Your sm.all bu.siness, in the for.m of a sole pro.prietorship, is person.ally liable for all deb.ts and actio.ns of the c.ompany