Which of the following statements is true about a sole proprietorship?
A) The owner of the sole proprietorship must report to shareholders.
B) It is easy to start and the owner has full control over the business.
C) A sole proprietorship can continue if the owner dies.
D) The owner of a sole proprietorship has limited liability.
B) It is easy to start and the owner has full control over the business.
B) It is easy to start and the owner has full control over the business.
To determine which of the following statements is true about a sole proprietorship, let's go through each option:
A) The owner of the sole proprietorship must report to shareholders.
This statement is incorrect. In a sole proprietorship, there are no shareholders since the business is owned and operated by a single individual. Therefore, there is no need for reporting to shareholders.
B) It is easy to start and the owner has full control over the business.
This statement is generally true. One of the advantages of a sole proprietorship is that it is relatively easy to start. There are usually minimal legal requirements and regulations compared to other business structures. Additionally, the owner has complete control and decision-making authority over the business.
C) A sole proprietorship can continue if the owner dies.
This statement is incorrect. A sole proprietorship is inherently tied to the individual owner. If the owner dies or decides to stop operating the business, the sole proprietorship typically ceases to exist.
D) The owner of a sole proprietorship has limited liability.
This statement is incorrect. In a sole proprietorship, the owner and the business are considered one entity in legal terms. As a result, the owner has unlimited personal liability for any debts, obligations, or legal claims related to the business. This means that personal assets of the owner can be used to satisfy business debts.
Therefore, the correct statement about a sole proprietorship is B) It is easy to start and the owner has full control over the business.