Q2 Is liability of sole proprietor limited or not? Explain with example.
Answers
Answer:
sole proprietor has unlimited liability.
Explanation: this is because there is no separate legal entity in sole trading business. the owner and business are one and the same as it is not registered.
Answer:
The liability of a sole proprietor is not limited to the extent of his share in business. The biggest downside to operate a business is that a sole proprietor is the solely responsible for liability. If your business incurs debts that it cannot pay from the profits, you are personally liable and responsible for payment. Creditors may sue you personally to satisfy the debt. The opposite is also true. If you have personal debts that are unpaid, a creditor may go after your business profits or assets to satisfy the debt. Along with liability for debts, as a sole proprietor you also have personal liability for any torts, or injuries, that occur as a result of any acts or omissions of your business.