The Simplicity of Sole Proprietorships
What makes sole proprietorships unique?
Choose the correct option:
a. the owner of the sole proprietorship must report to shareholders.
b. the owner of the sole proprietorship has limited liability.
c. a sole proprietorship is the simplest form of business organization.
d. a sole proprietorship can continue if the owner dies.
Answer:
The true statement about sole proprietorships is that they represent the simplest form of business organization, where one individual maintains complete control, reaps all profits, and bears all risks.
Explanation:
Regarding the statements about sole proprietorships, the correct option is c. a sole proprietorship is the simplest form of business organization. Sole proprietorships are businesses that are organized and operated by one person. The business and the owner are not separate legal entities, which means the owner has unlimited liability for all debts and obligations of the business. Sole proprietorships are straightforward to start, and the owner maintains full control over all decisions and profits; however, this also means bearing all the risks.
Option a is incorrect because a sole proprietor does not have to report to shareholders, as there are none in this business structure. Option b is incorrect as the owner has unlimited liability, not limited. Option d is incorrect because a sole proprietorship typically does not continue if the owner dies; it is not a separate legal entity that can persist independent of its owner.