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
