What Is the Chief Disadvantage of the Sole Proprietorship as a Form

question 72

Multiple Choice

What is the chief disadvantage of the sole proprietorship as a form of business organization when compared to the corporate form?

• A) Sole proprietorships are subject to double taxation of profits.
• B) The cost of formation.
• C) Inadequate profit sharing.
• D) Owners have unlimited liability.

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Definitions:

Disclosed Principal

In agency law, a principal whose identity is known by the third party at the time the agent makes a contract with the third party.

Doctrine of Estoppel

A legal principle that prevents a party from denying or asserting anything to the contrary of what has previously been established as truth.

Expressly Bind

To explicitly or distinctly commit or obligate oneself or an entity to an agreement or course of action.

Unidentified Principal

Refers to a situation in agency law where an agent acts on behalf of a principal, but the identity of the principal is not disclosed to the third party.