Owners of proprietorships, corporations and partnerships
Describe how the potential liability of owners of proprietorships, corporations and partnerships is different.
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The sole proprietor has infinite liability for things related to the business. This means that the sole proprietor is responsible for all the obligations of the industry, and even if those obligations exceed the amount the proprietor has invested in the business. Each partner in a partnership is usually liable for the activities of the partnership as a whole. Even if there are a hundred partners, each one is technically responsible for all the debts of the partnership. If ninety-nine partners declare personal bankruptcy, the hundredth partner still is responsible for all the partnership's debts.
A corporation is a legal entity that is liable for its own activities. Stockholders, the corporation's owners, have limited liability for the corporation's activities. They cannot lose more than the amount they paid to buy the corporation’s stock.
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