Understanding Sole Proprietorship

The video provides an in-depth look at sole proprietorship, a common form of business organization. It covers the basic features, including formation, liability, control, and lack of business continuity. The video explains the concept of unlimited liability, where personal assets can be used to pay off business debts. It also highlights the ease of formation and management, making it suitable for small businesses. The video concludes with a preview of upcoming discussions on the advantages and disadvantages of sole proprietorship.

What is a sole proprietorship primarily preferred for?

• Government agencies

• Non-profit organizations

• Small businesses

• Large corporations

Which of the following is a feature of sole proprietorship?

• Separate legal entity

• Unlimited liability

• Limited liability

• Complex formation process

What does unlimited liability mean for a sole proprietor?

• Liability is shared with partners

• Liability is limited to business assets

• Liability extends to personal assets

• No liability at all

What is a major risk for sole proprietors due to unlimited liability?

• Loss of business assets only

• Loss of personal assets

• Risk is shared with employees

• No risk involved

In a sole proprietorship, what happens if the owner passes away?

• Business is sold to the highest bidder

• Business is automatically transferred to the government

• Business is discontinued

• Business continues with a new owner

Which of the following is NOT a characteristic of a sole proprietorship?

• Separate legal entity

• Unlimited liability

• Easy to form and dissolve

• Full control by the owner

Why is a sole proprietorship not considered a separate legal entity?

• The business and owner are legally the same

• It requires complex legal documentation

• It is owned by multiple people

• It is a government-regulated entity

What is a disadvantage of sole proprietorship in terms of business continuity?

• Business can easily be transferred

• Business ceases to exist if the owner dies

• Business continues indefinitely

• Business is automatically taken over by the government

Which feature makes sole proprietorships appealing to small business owners?

• Complex tax structure

• Ease of formation and closure

• Shared decision-making

• Limited liability

Which type of businesses typically prefer sole proprietorship?

• Publicly traded companies

• Non-profit organizations

• Small local businesses

• Large multinational corporations