CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership
A founder runs a business alone and has not registered it as a separate legal entity. Creditors of the business can pursue the founder's personal assets for its debts. The organizational form is best described as a:
The business is best described as a sole proprietorship. It is owned by one person and is not a separate legal entity, so the owner bears unlimited personal liability for its debts. Corporations and limited liability companies shield their owners' personal assets from business creditors.
- Asole proprietorshipCorrect
- Blimited liability company
- Cpublicly traded corporation
Explanation
A sole proprietorship has no legal separation between owner and business, so the owner has unlimited personal liability. A limited liability company and a corporation are separate legal entities that shield owners' personal assets.
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