The other names of the sole proprietorship are a sole traders or simply a proprietorship. It is a type of business that is incorporated as such, rather it runs by a single person, he/she is accountable for clearing dues of income tax that is to be levied on the profits earned by the business.
Due to a lack of government oversight, a sole proprietorship is the easiest form of business to start or shut down. As a result, these sorts of businesses are extremely popular among sole businesses, consultants, and individual self- contractors. Because a distinct business or trade name isn't required, many sole owners do business using their own names.
Salient Features of a Sole Proprietorship
- A sole proprietorship is a type of business that is not incorporated and has just one owner who is responsible for paying personal income tax on any profits the business generates.
- Sole proprietorships are popular among small business owners and contractors because they are simple to set up and deconstruct owing to a lack of government participation.
- As a result of the company's growth, many sole proprietorships are reorganized into LLCs.
- One of the most significant drawbacks of sole proprietorships is that they are not protected by the government because they are unregistered. This indicates that the business's responsibilities extend to the owner.
Pros of a Sole Proprietorship
- Reduced paperwork
- There's no need to get an employer identification number(EIN) from the IRS.
- In comparison to other business forms, it is quick and simple to set up.
- Low fees and cost
- Tax benefits for businesses that operate as a pass-through entity
- More convenient banking
Cons of a Sole Proprietorship
- From the business to the owner, there is no limit to the amount of liability that can be transferred.
- Difficulty in obtaining funding
Following are some of the multiple choice questions on the Sole Proprietorship with answers that will help the students in developing their knowledge.
Sole Proprietorship MCQ
1. Which of the following is an advantage of a partnership?
2. The major policy and financial decision makers of a corporation are determined by the...
3. Which of the following is not the feature of the sole trade?
4. Which of the following is not the advantage of the sole trader?
5. Final account includes
6. Closing stock is recorded in trading account and ___________________________
7. Which of the following is NOT a type of business ownership?
8. Nike, Google and Apple are examples of.....
9. Sole Proprietorship is most suitable for
10. Law firms and doctor's offices are examples of.....
11. The reason for the end of the sole proprietorship can be
12. Which of the following is a type of business which operates as a separate legal entity?
13. Which of the following is the process of issuing loans in small amounts?
14. How is a corporation different from a sole proprietorship or partnership?
15. What is a Sole Proprietorship?
16. What is the most common form of business ownership?
17. What is the name of a person who owns part of a corporation?
18. Which business depends on just one person for the skills and talents to run the business?
19. Which of the following is a disadvantage of franchise?
20. A _______ forms boards to act as governing bodies. It is the most complicated form of business.
21. Disadvantages for this type of business include: owner pays for everything, hard to get money to start from the bank, owner might lack skills & unlimited liability.
22. This type of organization is a legal entity separate from its owners.
23. A _____ is owned and operated by one individual; an example would be a plumber.
24. Which statement is false
25. Sole Proprietorships will automatically dissolve when the owner
26. Information needed to prepare an income statement's revenue section is obtained from a work sheet's Account Title column and
27. Information needed to prepare a balance sheet liabilities section is obtained from a work sheet's Account Title column and
28. An amount written in parentheses on a financial statement indicates an estimate.
29. This type of business is owned by one person.
30. This type of business is a contractual agreement with a parent company to sell its products/services in an area.
31. Owners share the risks and the profits.
32. Owned by two or more individuals.
33. Disadvantages of this business type include: needs a partnership agreement, partners might not get along, owners share profits, unlimited liability.
34. McDonald's and Burger King are examples of....
35. Disadvantages of this type of business include: company is taxed on profits, regulated by the government, and hard to start.
36. Advantages of this type of business include: easy to start, and you can rely on a good company name and expertise.
37. The area of accounting which focuses on reporting information to internal users.
38. A comparison between two components of financial information.
39. This type of business is owned by many people called stockholders.
40. Advantages of this business include: easier to get money from the bank to start, share skills and share risks.
41. Which type of business allows the owner to keep all of the profit for him/herself?
42. When comparing the four main types of business organizations, which protects owners the MOST from personal financial liability due to being sued by a customer?
43. No paperwork (charter or agreement) is required to start which type of business?
44. Disadvantages of this type of business include: parent company is strict, you are limited in what you sell, and you must operate like every other franchise.
45. ___________ are words, symbols, names or devices used to specify the source of the goods, and are used to differentiate them from others.
46. A _____ is the right or license to sell a company's product or service at a designated location; an example would be McDonalds.
47. A _____ is a legal agreement between two or more people, and is the least common form of business.
48. Words, symbols, names or devices used to specify goods and differentiate one good from another are which of the following?
49. For starting Sole proprietorship, expert persons and enough capital are required.
50. The sole trade is useful for beauty parlour.
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