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24 December, 14:10

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

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  1. 24 December, 15:07
    The correct answer is unlimited liability for personal assets.


    Both terms can be described as follows:

    Sole Proprietorship: This type of business has only one owner of the firm and he is totally responsible for any liability or loss. Liability can be recovered by acquiring the personal assets of the owner.

    Corporation: This type of business can have a number of shareholders and each shareholder has limited liability for any loss in the company. in the case of any loss, the money he invested in the company can be acquired and there is no threat to his personal assets.

    Hence, the chief disadvantage of a sole proprietorship is unlimited liability for personal assets.
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