In a sole proprietorship, what happens to the owner's personal assets if the business incurs debt?

In a sole proprietorship, the owner and the business are considered one and the same legally. This means that there is no distinction between personal assets and business assets. If the business incurs debt and is unable to pay it, creditors can pursue the owner's personal assets to satisfy the debt. This could include a variety of personal properties, such as savings accounts, real estate, vehicles, or other assets that the owner possesses.

In contrast, other business structures, such as limited liability companies (LLCs) or corporations, provide a level of protection to personal assets, shielding them from being used to cover business debts. However, this protective barrier does not exist in a sole proprietorship, meaning the owner's personal liability is significant and direct. Therefore, if the business fails to meet its financial obligations, the owner's personal assets can indeed be seized to cover those debts.