Future Business Leaders of America (FBLA) Agribusiness Practice Test

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Enhance your FBLA Agribusiness knowledge with our comprehensive test. Dive into flashcards and multiple-choice questions, complete with hints and explanations, to ensure exam success. Prepare confidently for a bright future!

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Which of the following is a disadvantage of a Sole Proprietorship?

  1. Limited ability to raise capital

  2. Easy to administer

  3. Unlimited personal liability

  4. Simplified tax reporting

The correct answer is: Unlimited personal liability

A Sole Proprietorship is a business structure owned and operated by a single individual. One of the primary disadvantages of this type of business is the issue of unlimited personal liability. This means that the owner is personally responsible for all debts and obligations of the business. If the business incurs debt or faces legal issues, the owner's personal assets, such as their home or savings, can be at risk to satisfy those obligations. This characteristic can deter individuals from starting or maintaining a Sole Proprietorship, as the financial risks are significantly higher compared to other business structures like Limited Liability Companies or Corporations, which offer personal liability protection. Therefore, the correct answer highlights a crucial aspect of operating under a Sole Proprietorship that potential business owners need to consider when deciding on their business structure.

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