Question

IN WHICH OF THE FOLLOWING FIRM STRUCTURE LIABILITY OF OWNERS IS UNLIMITED
A)SOLE PROPRIETORSHIP
B)LTD LIABILITY COMPANY
C)PVT. LTD COMPANY
D)PUBLIC LTD COMPANY

Answer 1

Liability of owners is unlimited in sole proprietorship.

As sole proprietorship doesn’t involve any separate legal identity.

Any loss run by the company has to be paid by the owner.

A private limited company is also subject to liability because it consists of a distinct legal entity from the directors and the shareholders who are liable to the debts according to their investment.

Answer 2

Firm structure: A firm structure or business structure is a format that is legally recognized and characterized by the legal definition of that particular category.

There are many types of business structures. Some of them are,

• Sole Proprietorship
• General Partnership
• Limited Partnership
• Limited Liability Partnership (LLP)
• Limited Liability Limited Partnership (LLLP)
• Trust
• Joint Venture

Sole proprietorship: An individual or a couple in business which is simple to form and operate is called Sole proprietorship.

It provides greater flexibility, few legal controls, and less taxes.  

However, the owner is liable for all debts and costs incurred by the business.

Hence, in a Sole proprietorship the compliance cost is maximum.

The answer is (a) Sole proprietorship

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