question.jpgIn Business Law

What happens if a sole proprietorship is sued?

Since a sole proprietorship is not a separate legal entity from its owner, the owner is on-the-hook for any liability attached to the business. So if someone wins a lawsuit against your sole proprietorship (such as in a claim for negligence, or default on a contract), you will be legally obligated to cover that judgment. This is one of the greatest risks in starting a sole proprietorship (because several other business forms offer their owners limited liability), particularly where there is any potential danger connected to your business, its operation and/or its products.