One Disadvantage of a Sole Proprietorship as a Form of Businessorganization

question 27

Multiple Choice

One disadvantage of a sole proprietorship as a form of businessorganization is that

• A)sole proprietorships cannot lower the transaction costs associated with contracting with resource owners
• B)sole proprietorships are less efficient than corporations, because they are less specialized in
• Production
• C)owners of sole proprietorships can lose all their personal assets if the business is sued or fails
• D)owners of sole proprietorships generally find it difficult to negotiate separation agreements with the
• Other partners in the firm
• E)owners of sole proprietorships generally have very little control over how they operate their businesses

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Definitions:

Employee

An individual who works part-time or full-time under a contract of employment, contributing labor and expertise to an employer.

Employer

An individual or organization that hires and pays people to work.

Wages Expense

The total cost incurred by an organization to pay salaries and wages to its employees for a specific period.

Accrued Liability

A liability that has been incurred, is recognized on the balance sheet, and has not yet been paid.