As a single proprietor, you face significant personal risks and liabilities:
- Unlimited personal liability - As the sole owner, you are personally liable for any debts, lawsuits, or other obligations of the business. If the business cannot pay its debts, creditors can go after your personal assets like your home, savings, retirement funds, etc.
- Loss of personal asset protections - Your personal assets are not legally separate from the business assets. If the business is sued and loses a lawsuit, creditors may be able to seize your personal assets to satisfy business debts.
- Risk of personal bankruptcy - If a large liability occurs that wipes out the business assets, you could face personal bankruptcy to discharge remaining business debts. This would severely