Answer:
D. Unlimited liability
Explanation:
A sole proprietorship is a business owned by a single person who, unlike associations and other more complex business structures (corporations and LLC), does not have to register with the state to exist. If you are the sole owner of a business, you automatically have a sole proprietorship simply because you do business.
A sole proprietorship also has disadvantages. The biggest problem of sole proprietorships is that the owner's personal finances are linked to those of the business. This means that if the business suffers bankruptcy, the same happens to the owner so you have unlimited liability. Therefore, forming a sole proprietorship is more risky. The same happens if the business is sued: the lawsuit also falls against you (which means that you are responsible for all costs associated with the litigation). Sole proprietorships, on the other hand, must pay both income taxes and self-employed employee taxes (Social Security and Medicare). This means that, as the company generates more profits, it must also pay more taxes.
