ch 26

Which statement is true about creating a sole proprietorship ?

No documentation is required to create sole proprietorship .

Which of the following is required to create a sole proprietorship ?

Nothing

When the owner of a sole proprietorship dies , what happens ?

The business is dissolved .

Which of the following is a disadvantage of operating as a sole proprietorship ?

The owner of a sole proprietorship is personally liable for all business debts .

For tax purposes , sole proprietorships :

are pass - through entities .

A sole proprietorship differs from a corporation in :

how stock is sold .

Which of the following are TWO disadvantages of a sole proprietorship ? Select 2 answers .

limited capital personal liability for debts

The simplest form of business to establish is a :

sole proprietorship .

Which of the following are advantages of operating as a sole proprietorship ? Choose 2 answers .

✔Sole proprietorships are not taxed . ✔Forming a sole proprietorship is simple and relatively inexpensive .

A sole proprietorship has flexibility in decisions regarding : ( Choose 2 answers . )

✓ when to schedule vacation ✔pricing of services or goods sold .

Myra owns a tanning salon called Bronze Beauties and , after battling the disease for six weeks , Myra dies , leaving behind a spouse and three children . Upon Myra's death , the Bronze Beauties tanning as a sole proprietorship . Myra has six employees who work at the salon . Myra contracts COVID - 19 , salon :

is automatically dissolved .

Which of the following requires a filing with the state in order to be created ? Select 2 answers .

✔A corporation ✔An LLC

The owner of a sole proprietorship pays the following taxes on business income profits : ( Choose three ) .

✔Medicare ✔Social Security ✔Personal income

Roy owns an engine repair shop , Roy's Custom Repair . Roy's customer Floyd is in the shop one day and trips over a tool lying on the ground . Floyd hits his head on the concrete floor and sustains massive injuries . Floyd sues Roy's Custom Repair for his injuries . If Floyd's lawsuit is successful , Floyd can recover from :

Roy's Custom Repair and Roy personally .

You plan to open a tattoo parlor , and you are from the business and you don't want anyone telling you how to run your business trying to decide the best form of business entity to use . You decide on a sole proprietorship ( a solely owned business ) , because you want all the profits Do you think there might be any disadvantages to creating your tattoo parlor as a sole proprietorship ?

Yes . As a sole proprietor , you can be held personally liable for all the business's debts , and your options for raising capital will be limited

What is the combination of factors that sets sole proprietorships apart from all other business entities ?

ease of formation , along with receiving all of the profit

Tala operates Sunshine Event Planning as a sole proprietorship . Lately , Tala has become dissatisfied with her employee Leon . Leon continually refuses to follow directions , calls in late to work , and generally is not performing up to Tala's standards . Before Tala can fire Leon , she must obtain approval from :

no one

In terms of personal liability of the owner , a sole proprietorship :

offers no protection .

In order to capitalize a sole proprietorship , an owner is likely to :

pay out of their own pocket or undertake personal debt .

employees . Evelyn plans to operate the business under the name " Cupcake Dreams . " To legally operate her business , Evelyn will need to : Evelyn decides to open a business selling her one - of - a - kind cupcakes . Evelyn will be the sole owner of the business , although she will have a couple of

register her business name

Johnson lives near Dollywood , a popular theme park in Tennessee . Johnson decides to begin a new money - making venture selling screen printed t shirts from a booth just down the road from the theme park to take advantage of the traffic that flows by on its way to the park . Johnson's t - shirts , however , will not be Dollywood - themed t - shirts ; they will be Johnson's own creations . Johnson's daughter Susan helps him in his new venture by manning the booth from time to time , but Johnson has total control over everything about the business - from ordering the t - shirts , paying the bills , pricing the t - shirts , paying the taxes on his sales , and receiving all the profits from the venture . Even though Johnson put no thought into what kind of business venture he was creating when he started his business , Johnson has effectively created a :

sole proprietorship