In what type of business structure is the owner personally liable for all debts?

A sole proprietorship is a type of business structure where the owner is personally liable for all debts incurred by the business. In this setup, there is no legal distinction between the owner and the business entity itself. This means that any financial obligations, debts, or legal liabilities of the business are considered the owner's responsibilities.

For instance, if a sole proprietorship takes out a loan and cannot repay it, creditors can pursue the owner's personal assets, such as their home or personal savings, to settle those debts. This level of personal liability is a significant consideration for individuals thinking about starting a business since it indicates that the owner assumes all risks associated with their entrepreneurial activities.

In contrast, other structures like corporations and limited liability companies (LLCs) provide a level of protection for the owner's personal assets. Partnerships may also expose owners to some degree of liability depending on the type of partnership formed. However, in a sole proprietorship, the lack of legal separation means full personal liability.