Which of the following statements about a sole proprietorship is TRUE?

Which of the following statements about a sole proprietorship is TRUE?

• A. A. The business, or any part of it, can be sold, altered, or exchanged at will.
• B. B. The business will survive the death of the owner.
• C. C. It provides the owner with limited liability for debts and actions of the business.
• D. D. The business is not subject to Federal income tax.

Answer: (A)

A sole proprietorship is a simple business structure where one individual owns and operates the business. The correct statement indicates that the business, or any part of it, can be sold, altered, or exchanged at will. This is true because the sole proprietor has complete control over the business and its assets. Since there is no legal separation between the owner and the business, the owner can make decisions regarding the business's operations, including selling or changing any part of it without any need for approval from partners or shareholders. In contrast to this, the other statements do not accurately reflect the nature of a sole proprietorship. For instance, the survival of the business after the owner's death is not guaranteed, as the business effectively ends upon the owner's passing unless specific arrangements, like a succession plan, are in place. Additionally, a sole proprietorship does not provide limited liability; the owner is personally liable for all debts and actions, meaning personal assets can be at risk. Lastly, a sole proprietorship is subject to federal income tax, as the business’s income is reported on the owner's personal tax return.

A sole proprietorship is a simple business structure where one individual owns and operates the business. The correct statement indicates that the business, or any part of it, can be sold, altered, or exchanged at will. This is true because the sole proprietor has complete control over the business and its assets. Since there is no legal separation between the owner and the business, the owner can make decisions regarding the business's operations, including selling or changing any part of it without any need for approval from partners or shareholders.

In contrast to this, the other statements do not accurately reflect the nature of a sole proprietorship. For instance, the survival of the business after the owner's death is not guaranteed, as the business effectively ends upon the owner's passing unless specific arrangements, like a succession plan, are in place. Additionally, a sole proprietorship does not provide limited liability; the owner is personally liable for all debts and actions, meaning personal assets can be at risk. Lastly, a sole proprietorship is subject to federal income tax, as the business’s income is reported on the owner's personal tax return.