Business Structures and Their Characteristics

What is a key characteristic of a sole proprietorship?

• The business is owned by shareholders.

• The owner has limited liability.

• The business and the owner are legally the same entity.

• It requires at least two people to start.

Which of the following is an advantage of a sole proprietorship?

• Easy to dissolve

• No control over business decisions

• High tax rates

• Limited access to capital

In a partnership, what is the main purpose of a partnership agreement?

• To specify the color scheme of the business logo

• To outline the roles and responsibilities of each partner

• To determine the business name

• To limit the liability of the partners

Which of the following entities offers its owners limited liability?

• Sole Proprietorship

• General Partnership

• Corporation

• None of the above

What is a disadvantage of a sole proprietorship?

• Simple to establish

• Unlimited liability

• Complete control by the owner

• Low startup costs

Which of the following best describes a partnership?

• A business owned by one person

• A business owned by two or more persons who share profits and losses

• A business with limited liability for all owners

• A business that is easy to dissolve

What is a characteristic feature of a corporation?

• It cannot enter into contracts.

• It is not taxed as a separate entity.

• It has perpetual existence.

• It requires no formalities for formation.

Which of the following is NOT an advantage of a corporation?

• Ability to raise capital through stock

• Limited liability for shareholders

• Simple decision-making process

• Perpetual existence

In a sole proprietorship, who is responsible for the debts of the business?

• The government

• The shareholders

• The owner

• No one, as the business has limited liability

What does it mean for a partnership to have "joint and several" liability?

• Only the most responsible partner is liable for debts.

• Each partner is individually responsible for their own actions only.

• Each partner can be held responsible for the full amount of the business's debts.

• Partners share liability equally, regardless of fault.