Which type of business ownership allows for unlimited liability?

A sole proprietorship is a type of business ownership where an individual operates the business on their own. The key feature of this structure is that the owner has unlimited liability. This means that there is no legal distinction between the business and the owner; any debts or legal obligations incurred by the business are the owner's personal responsibility. If the business faces financial issues or lawsuits, the owner’s personal assets can be used to settle those debts.

In contrast, other business structures, such as corporations, partnerships, and limited liability companies (LLCs), provide some level of liability protection. For instance, corporations protect their owners (shareholders) from personal liability for business debts. Similarly, an LLC limits the personal liability of its members, meaning their personal assets are generally safe from business liabilities. Partnerships can vary in terms of liability, especially between general and limited partners, but typically do not expose the owner's personal assets to the same degree as a sole proprietorship.