Commercial Applications
The liability of a sole proprietor is limited to the assets of the business.
- True
- False
Answer
False
Reason — The liability of a sole proprietor is unlimited, not limited. The proprietor is personally liable for all the debts of the business. In case the assets of the business are insufficient to meet its debts, the personal property of the proprietor can be attached to pay creditors.
Related Questions
Statement I: The Joint Hindu family business refers to a business which is owned by members of a Joint Hindu family.
Statement II: The Joint Hindu family form of business is one in which the family possesses some inherited property.
- Only I is correct
- Both I and II are correct
- Only II is correct
- Both I and II are wrong
Meera runs a bakery. Due to a drop in demand for cakes, she starts focusing on cookies and bread. She quickly adapts her business to market trends without needing approvals. Which merit of sole proprietorship does this demonstrate?
- Unlimited liability
- Secrecy of operations
- Flexibility of operations
- Lack of continuity
State three characteristics of sole proprietorship.
Mention two limitations of sole proprietorship and of joint Hindu family business.