Which of the following is a disadvantage of a sole proprietorship?

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Multiple Choice

Which of the following is a disadvantage of a sole proprietorship?

Explanation:
In a sole proprietorship the owner and the business are not separate legal entities, so there is unlimited liability. This means the owner is personally responsible for all business debts and obligations, and personal assets like savings, home, or car can be used to cover them if the business can’t pay. That exposure to personal financial risk is the main disadvantage of this structure. The other statements describe advantages rather than downsides—it's typically easy to organize and has fewer formal restrictions. So they don’t describe the negative aspect that sets apart a sole proprietorship.

In a sole proprietorship the owner and the business are not separate legal entities, so there is unlimited liability. This means the owner is personally responsible for all business debts and obligations, and personal assets like savings, home, or car can be used to cover them if the business can’t pay. That exposure to personal financial risk is the main disadvantage of this structure.

The other statements describe advantages rather than downsides—it's typically easy to organize and has fewer formal restrictions. So they don’t describe the negative aspect that sets apart a sole proprietorship.

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