BUSINESS ADMINISTRATION
BUSINESS ENVIRONMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Two or more people are joined as co-owners
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Sole proprietor is personally liable for business debts
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The business must pay business income taxes
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Business is taxed separately from the owner
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Detailed explanation-1: -Sole proprietors have unlimited liability. This implies that the owner is personally responsible for payment of debts in case the assets of the business are not sufficient to meet all the debts.
Detailed explanation-2: -Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk. May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans.
Detailed explanation-3: -With a sole proprietorship, because there is no legal distinction between the owner and their business, the owner can become personally liable for the debts of their sole proprietorship. If a creditor sues the business because the business owes them money, they can access the owner’s own personal property in a lawsuit.
Detailed explanation-4: -Answer and Explanation: It is correct that b) the owner of a sole proprietorship is personally responsible for all the company’s debts. A sole proprietorship allows an individual to do business but does not distinguish the business from the business owner.
Detailed explanation-5: -If a sole proprietorship fails, the owner may lose whatever was invested in the business; however, the owner’s personal assets are not at risk. Sole proprietors have unlimited liability for the debts of their business. This means that if their business gets into financial trouble they can lose their personal assets.