What Is True About a Sole Proprietorship

question 3

Multiple Choice

What is true about a sole proprietorship?

• A) The owner is not responsible for liabilities of the business
• B) The legal existence of a proprietorship ends when the owner passes
• C) A proprietor and her business are legally separable
• D) Proprietorships are not taxed at the owner's personal tax rate

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Definitions:

Cash Dividends

Payments made by a corporation out of its earnings to its shareholders, usually in the form of cash.

Stock Dividends

A payment made to shareholders in the form of additional shares, rather than cash.

Stockholders' Equity

Funds owned by the shareholders of a company, calculated as the company's total assets minus its total liabilities, representing ownership interest in the company.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company’s profits via dividends.