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Sole proprietorships and partnerships are good options for entrepreneurs who want limited personal liability for business debts.

True

False

Answer :

Final answer:

Saying that sole proprietorships and partnerships offer limited personal liability is false; these businesses entail unlimited personal liability for owners. Corporations, on the other hand, provide limited liability, protecting personal assets of shareholders from business debts.

Explanation:

It is false that sole proprietorships and partnerships are good options for entrepreneurs who want limited personal liability for business debts. In fact, these business forms involve the opposite: sole proprietorships and partnerships expose the owners to unlimited personal liability for the debts and obligations of the business. If a business organized as either fails or incurs debt, the personal assets of the owners can be used to pay off liabilities.

In contrast, a corporation offers limited liability protection to its shareholders, meaning they are not personally responsible for the debts of the business beyond their investment in the company’s stock. This structure provides a legal 'shield' from liability. Entrepreneurs who want limited liability often choose to form a corporation despite the higher costs and the fact that corporations face double taxation (once at the corporate level and again when dividends are distributed).

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