Question

Is liability of sole proprietor limited or not?

Answer 1

A sole proprietorship is the most basic business form. The owner needn't file with the secretary of state to create the business. Additionally, the owner does not have to follow corporate formalities, such as the requirement to hold an annual meeting or to keep meeting minutes. While a sole proprietorship may offer lax formalities and easy formation, it has drawbacks, one being the owner’s exposure to liability.

Unlimited Personal Liability

Sole proprietors have unlimited personal liability. There is no legal distinction between the owner and the business. This means that creditors of the business and individuals who have other claims against the owner can reach both the owner’s business and personal assets.