True or False?  Limited liability is a key advantage of partnership and sole proprietorships over corporations.

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

This statement is false.  In fact, it is the exact opposite of the truth.

Limited liability is not an advantage enjoyed by partnerships and sole proprietorships.  In fact, limited liability is a major reason for a person to incorporate rather than to do business as a sole proprietor.  In sole proprietorships and partnerships, the owners of the firm are completely liable for any debts incurred by the firm.  There is no legal distinction between the person and the business.  The person's assets can be taken to pay for the firm's debts.

This statement is false, then, because limited liability is an advantage of incorporation, not of the other types of ownership mentioned here.

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sarahokoth's profile pic

sarahokoth | Student, Grade 9 | (Level 1) Honors

Posted on liability is only viable to the limited partners in a partnership business and it is not in sole proprietorship.when a sole proprietor is under a huge debt then he or she will have to sell or give out personal things out of the business to pay the debts.