Which One of the Following Statements Concerning a Sole Proprietorship

question 8

Multiple Choice

Which one of the following statements concerning a sole proprietorship is correct?

• A) A sole proprietorship is the least common form of business ownership.
• B) The profits of a sole proprietorship are taxed twice.
• C) The owners of a sole proprietorship share profits as established by the partnership agreement.
• D) The owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts.
• E) A sole proprietorship is often structured as a limited liability company.

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Definitions:

Liability

An obligation arising from past transactions or events, which may result in an outflow of resources embodying economic benefits.

Provision

An amount set aside in the accounts to cover a probable future expense or liability, recognized for known obligations of uncertain timing or amount.

Onerous Contract

A contract where the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received from it.

Unavoidable Costs

Costs that cannot be eliminated, reduced, or postponed, and must be incurred regardless of specific business decisions or changes in operations.