Which form typically exposes owners to personal liability for debts?

• A. Corporation
• B. LLC
• C. Sole proprietorship
• D. Cooperative

Answer: (C)

This question is about how liability works across different business forms. In a sole proprietorship, there is no separation between the owner and the business; the owner and the business are effectively the same entity. That means the owner is personally responsible for all debts and obligations of the business, so creditors can reach personal assets like savings or a home to satisfy these debts.

The other forms typically provide limited liability. A corporation is a separate legal entity, so its debts are its own, and owners (shareholders) are usually not personally liable beyond their investment. An LLC offers a similar shield, with the owners (members) protected from personal liability for the company’s debts in most situations. A cooperative generally limits member liability to their investment or shares, not the members’ personal assets for business debts, though there can be exceptions.