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.
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.
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