What amounts does a proprietor have "at risk"?

A proprietor has "at risk" amounts that include both the invested amounts and personally liable debts. This concept is rooted in tax law and generally refers to the funds and assets that are actually on the line in a business venture.

Invested amounts are the capital the proprietor has directly put into the business. This could include money used to purchase equipment, inventory, or other assets necessary for business operation. Personally liable debts are those obligations that the proprietor has personally guaranteed. These debts are significant because if the business does not succeed, the proprietor could lose not only their investments but may also be required to pay these debts from personal assets.

The other concepts addressed in the alternatives do not accurately reflect the "at risk" definition. Amounts earned from sales are profits that may be generated after taking on risks but are not what the proprietor has invested or is liable for. Money retained in the business represents profits that have not been taken out, but they do not reflect the initial financial backing. Projected future earnings are speculative and do not represent actual amounts the proprietor currently has on the line. Thus, the definition of "at risk" is effectively captured by the invested amounts and the debts for which the proprietor is personally responsible.