Compare and contrast the potential liability, Financial Management

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Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations.

The sole proprietor has limitless liability for matters relating to the business.  The meaning of this is that the sole proprietor is accountable for all the obligations of the business, although if those obligations exceed the amount the proprietor has invested in the business.

Every partner in a partnership is generally liable for the activities of the partnership as a whole.  Even if there are a hundred partners, everyone is technically accountable for all the debts of the partnership.  If 99 partners declare personal bankruptcy, the hundredth partner still is accountable for all the partnership's debts.

A corporation is a legal entity which is liable for its own activities.Stockholders, the corporation's owners, comprise limited liability for the corporation's activities.  They cannot lose much more than the amount they paid to buy the corporation's stock.


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