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Question

The liability of sole proprietor is

A
Limited to the extent of his capital invested
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B
Limited to the extent of the value of his business assets
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C
Limited to the extent of the value of his business assets and all his private estates
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D
Limited to the extent of his profit earned
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Solution

The correct option is C Limited to the extent of the value of his business assets and all his private estates
Sole proprietors have unlimited liability. This implies that the owner is personally responsible for payment of debts in case the assets of the business are not sufficient to meet all the debts. As such the owner’s personal possessions such as his/her personal car and other assets could be sold for repaying the debt.

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