Which of the following statements is true about sole proprietorships?
A. A sole proprietorship is the simplest form of business organization.
B. The owner of the sole proprietorship has limited liability.
C. A sole proprietorship can continue if the owner dies.
D. The owner of the sole proprietorship must report to shareholders.
A. A sole proprietorship is the simplest form of business organization.
This statement is true. A sole proprietorship is a business owned and operated by one person, without the need for creating a separate business entity, like an LLC or Corporation. It's simple to set up with minimal paperwork and often requires just a business license or permit, depending on the type of business and local regulations.
B is false because the owner of a sole proprietorship has unlimited liability, meaning their personal assets can be used to settle the business’s debts.
C is false because generally, a sole proprietorship does not continue if the owner dies. The business and the owner are considered the same legal entity, so the business effectively ceases upon the death of the proprietor, unless there are provisions for transfer of ownership in a will or similar document.
D is false because in a sole proprietorship, there are no shareholders; there is only one owner who has full control over the business.