A Business Is Likely a Sole Proprietorship If

question 89

Multiple Choice

A business is likely a sole proprietorship if:

• A) it has two or more owners, with each owner liable for every other owner's actions.
• B) it has only one owner who has unlimited liability.
• C) it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person."
• D) multiple owners are liable only to the extent of their own investment.

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Definitions:

Liquidation

The process of closing a business and distributing its assets to claimants, typically occurring when a company is insolvent.

Homemade Leverage

A strategy where investors adjust the leverage or risk of their portfolio through borrowing or investing their own money, rather than relying on the company to do so.

Direct Bankruptcy Costs

These are the costs associated directly with the bankruptcy process, including legal fees, accounting fees, and other administrative expenses for processing a bankruptcy filing.

Legal and Administrative Expenses

Costs associated with the legal operation of a business and general administrative tasks, including legal fees, licensing, and managerial salaries.