Understanding Sole Proprietorship

What is the definition of a sole proprietorship?

• A sole proprietorship is a type of franchise business.

• A sole proprietorship is a business owned by multiple partners.

• A sole proprietorship is a corporation with shareholders.

• A sole proprietorship is a business owned and operated by one individual.

List two key characteristics of a sole proprietorship.

• No formal registration required

• Complete control by the owner; Personal liability for debts.

• Shared decision-making with partners

• Limited liability for the owner

What is one major advantage of a sole proprietorship?

• Complex tax requirements.

• Simplicity in setup and management.

• Limited personal liability.

• High startup costs.

How does a sole proprietorship differ from a partnership?

• A sole proprietorship can have multiple owners, while a partnership has only one owner.

• A sole proprietorship is owned by one person, while a partnership is owned by two or more people.

• A sole proprietorship requires a formal agreement, while a partnership does not.

• A sole proprietorship is a type of corporation, while a partnership is not.

What is a significant disadvantage of a sole proprietorship?

• Limited access to capital

• Easy transfer of ownership

• Full control over business decisions

• Unlimited personal liability

Name one legal requirement for registering a sole proprietorship.

• Register with the IRS as a corporation.

• File annual reports with the state government.

• Obtain a trademark for the business name.

• Obtain a business license or permit.

What type of liability do sole proprietors face?

• Unlimited liability

• Shared liability

• No liability

• Limited liability

How does management in a sole proprietorship typically function?

• The owner delegates all management tasks to employees.

• Management is conducted by a board of directors.

• Management is shared among multiple partners.

• Management in a sole proprietorship is centralized and primarily handled by the owner.

What is the role of the owner in a sole proprietorship?

• The owner must share profits with a partner.

• The owner has no financial risk in the business.

• The owner is only responsible for hiring employees.

• The owner manages the business and is personally liable for its debts.

Can a sole proprietorship have employees?

• Only corporations can have employees.

• No, a sole proprietorship cannot have employees.

• A sole proprietorship must operate without any staff.

• Yes, a sole proprietorship can have employees.