Question 12: In a sole proprietorship or a partnership, the sole proprietor or partner is personally liable for all the debts of the business, whereas the owners of a company are only liable up to the amount they have invested in the company. Why is this so? (2 marks) A. A company, unlike a sole proprietorship or partnership, has greater financial power and as such, a company should be in a position to be liable for its own debts. B. The sole proprietor and partner have no shareholders, whereas a company has shareholders, many of whom play no active part in the running of the company. Therefore, it would be unconscionable to hold such shareholders liable for the debts of the company. C. Given that sole proprietorships and partnerships are easy to set up, making the sole proprietor and partner personally liable for the debts of their businesses serves as a deterrence to setting up such business entities, while keeping the debts of a company separate from the owners encourages the setting up of companies. D. A company, unlike a sole proprietorship or partnership, is a separate legal entity, in that the company is separate from its owners. As such a company is liable for its own debts. Given that there is no separate legal entity in a sole proprietor and partnership, the sole proprietor and partner are personally liable for the debts of their business