Which of the following is a disadvantage of a sole proprietorship?

• A. Unlimited liability
• B. Limited size
• C. Limited life
• D. All of the above

Answer: (D)

The main idea is that sole proprietorships come with several drawbacks that can limit the business. Unlimited liability means the owner is personally responsible for all debts and obligations of the business, so personal assets can be at risk if the business fails. Limited size reflects the difficulty of growing the business because funding and resources come primarily from the owner, making it harder to raise large amounts of capital. Limited life means the business won’t automatically continue if the owner dies, retires, or leaves the business, which hurts continuity and transferability. Since each of these is a genuine disadvantage, the option that includes all of them—the choice signaling “all of the above”—is the best answer.