Unlimited Liability Means Personal Risk for Sole Traders

Steps:

• Recall that unlimited liability means the owner's personal assets are at risk for business debts.
• Evaluate each option against this definition to identify the accurate description.
• Eliminate choices that misrepresent liability, management, or funding rules.
• Confirm the option that directly ties personal and business finances.

Why D is correct:

• Unlimited liability legally requires sole traders to use personal assets, including savings and property, to cover business debts if the business fails, per business law definitions.

Why the others are wrong:

• A: Sole traders can take bank loans; liability concerns repayment, not access.
• B: This describes solo management, not financial liability.
• C: Sole traders must use personal funds for business loans under unlimited liability.

Final answer: D