Compare potential liability of owners of proprietorships, 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 infinite liability for matters relating to the business.  This means that the sole proprietor is accountable for all the responsibilities of the business, even if those obligations go above the amount the proprietor has invested in the business.

Each partner in a partnership is typically liable for the activities of the partnership as a whole.  Still if there are a hundred partners, each one is technically in charge for all the debts of the partnership.  If ninety-nine partners announce personal bankruptcy, the hundredth partner still is in charge for all the partnership's debts.

A corporation is a legal unit that is responsible for its own activities.  The corporation's owners, Stockholders have limited liability for the corporation's activities.  They can't lose in excess of the amount they paid to buy the corporation's stock.

 

 


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