The ability of a sole proprietorship to pay its debts may be determined by the financial strength of the owner.

Question

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Since a sole proprietorship is not a separate legal entity from its owner, the owner's personal financial strength and assets are directly linked to the business's ability to pay its debts. If the owner has sufficient personal funds, the business would be able to pay its debts. Conversely, if the owner is in financial difficulty, the business may also struggle to pay its debts.

The Ability of a Sole Proprietorship to Pay Its Debts