Question

1. why would unlimited liability be considered a major drawback to sole proprietorships? a. personal assets of the sole proprietor (like house, car, bank accounts) could be seized to pay creditors and liabilities b. personal assets are protected from creditors by the courts c. they can borrow unlimited funds to support and grow the business d. more taxes would be owed at the end of the year

Explanation:

To determine the answer, we analyze each option:

• Option a: In a sole proprietorship with unlimited liability, the owner's personal assets (house, car, bank accounts) are at risk of being seized to pay business debts/liabilities. This is a key drawback of unlimited liability.
• Option b: This is incorrect as unlimited liability means personal assets are not protected from creditors.
• Option c: Borrowing unlimited funds is not related to the drawback of unlimited liability; it's more about access to capital, not a liability issue.
• Option d: Unlimited liability does not directly relate to the amount of taxes owed; taxes are based on income/profit, not liability structure.

Answer:

a. Personal assets of the sole proprietor (like house, car, bank accounts) could be seized to pay creditors and liabilities