Which type of business offers the owner the greatest potential personal liability?

The choice of a sole trader is associated with the greatest potential personal liability because, in this type of business structure, there is no legal distinction between the owner and the business. This means that the owner is personally responsible for all debts and obligations of the business. If the business incurs debts or faces legal action, the owner's personal assets, such as their home or savings, can be at risk to settle those liabilities.

In contrast, other business structures, like a limited company or a limited liability partnership, protect the owners' personal assets from business debts. In these cases, liability is usually limited to the amount that the owners have invested in the business. Partnerships also present some liability concerns, but partners typically share responsibilities and liabilities, which can limit individual exposure compared to a sole trader situation. Therefore, the sole trader model inherently carries the highest level of personal financial risk for the owner.