How Might a Sole Proprietorship Have a Possible Tax Advantage

question 188

Multiple Choice

How might a sole proprietorship have a possible tax advantage?

• A) It does not have to make tax payments until the end of the year.
• B) It does not have to pay federal income taxes.
• C) It does not have to charge sales tax on its merchandise.
• D) It does not pay special state and federal taxes that corporations pay.
• E) It is subject to a form of double taxation.

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Definitions:

Period Costs

Costs that are expensed in the period they are incurred rather than being capitalized or included in the cost of goods sold, such as selling, general, and administrative expenses.

Selling

The process of promoting and exchanging goods or services for value.

Administrative

Pertaining to the activities involved in the management, governance, or organization of a business, typically those responsible for enforcing policies and making decisions.

Operating Expenses

Costs associated with running a business's core operations on a day-to-day basis, excluding the cost of goods sold.