Which form commonly has unlimited personal liability for the owner?

• A. Corporation
• B. Limited Liability Company
• C. Sole Proprietorship
• D. Partnership

Answer: (C)

The core idea is how liability is tied to the business form. In a sole proprietorship, there’s no legal separation between the owner and the business. That means the owner is personally responsible for all the business debts and obligations. If the business can’t pay its debts or is sued, creditors can pursue the owner’s personal assets—like savings or a home—to satisfy those claims. That’s what unlimited personal liability looks like.

In contrast, corporations and limited liability companies create a separation between the business and the owner, so owners usually aren’t personally liable for business debts. Partnerships can involve personal liability for general partners, but when the question asks for the form commonly associated with unlimited personal liability for the owner, the sole proprietorship is the clear fit.