GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which one of the following is always true regarding the differences between sole trader and partnership?
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Sole traders have unlimited liability but all partnerships enjoy limited liability.
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Sole traders are very small businesses that employ just a few workers, and partnerships are always larger than sole trader businesses.
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Sole traders are businesses owned by one person but partnerships have two or more owners.
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Sole traders are run by the less educated like corner shop owners, but partnerships are formed by licensed professionals like lawyers and accountants.
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Explanation:
Detailed explanation-1: -The most important difference is that in sole proprietorships, only one person owns the business, while in partnerships, the owners can be two or more people. This means that sole proprietors have full control over their business, while partners must share control with others.
Detailed explanation-2: -Sole proprietors report profits and losses from their business on their personal tax returns, using Schedule C. They submit only one return. Partnership owners file two returns: They submit Form 1065, which is its own informational tax return.
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