Commercial Applications
Assertion (A): Sole proprietors have unlimited personal liability for the business debts.
Reason (R): Personal assets of the owner may be used to settle business obligations in case of financial difficulties.
- A is true but R is false.
- A is false but R is true.
- Both A and R are true and R explains A.
- Both A and R are true but R does not explain A.
Sole Proprietorship
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Answer
Both A and R are true and R explains A.
Reason — The Assertion is true — a sole proprietor has unlimited liability for all the debts of the firm. The Reason is also true and correctly explains the assertion — in case the business assets are insufficient to pay creditors, the personal property of the proprietor can be attached and used to settle business obligations.
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Related Questions
Which of the following options regarding Joint Hindu Family Business is wrong?
- Basis of formation : By Birth
- Division of profit : Unequal share
- Management : Only by Karta
- Application of law : Hindu Succession Act
Statement I: The capital of joint Hindu family business is limited to the ancestral property.
Statement II: The Karta of joint Hindu family business may not be competent to manage the business.
- Both I and II are correct
- Both I and II are wrong
- Only I is correct
- Only II is correct
In a sole proprietorship, the business and the owner are considered …………… .
- Two separate legal entities
- A single legal entity
- Governed by different laws
- Managed under a partnership deed
In a joint Hindu family business, all members have equal liability, including the karta.
- True
- False