About Sole Proprietorship

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?

  • Unlimited Liability
  • Arguments
  • Shared responsibility
  • Less investors

2. The major policy and financial decision makers of a corporation are determined by the...

  • CEO/GM/President
  • Chairman of the Board
  • Shareholders
  • Board of Directors

3. Which of the following is not the feature of the sole trade?

  • Individual ownership
  • Limited liability
  • Secrecy
  • Undivided risk

4. Which of the following is not the advantage of the sole trader?

  • Easy formation
  • Quick decision
  • Unlimited liability
  • Personal control

5. Final account includes

  • Trial balance
  • journal entries
  • trading account ,profit and loss account and balance sheet
  • ledger account

6. Closing stock is recorded in trading account and ___________________________

  • balancesheet liablity side
  • balancesheet asset side
  • profit and loss account
  • trading account debit side

7. Which of the following is NOT a type of business ownership?

  • partnership
  • sole proprietorship
  • entrepreneurship
  • franchise

8. Nike, Google and Apple are examples of.....

  • Sole Proprietorships
  • Partnerships
  • Corporations
  • Franchises

9. Sole Proprietorship is most suitable for

  • Medium scale concerns
  • Large scale concerns
  • Small scale concerns
  • None of the above

10. Law firms and doctor's offices are examples of.....

  • Sole Proprietorships
  • Partnerships
  • Corporations
  • Franchises

11. The reason for the end of the sole proprietorship can be

  • Insolvency
  • Insanity
  • Death
  • All the above

12. Which of the following is a type of business which operates as a separate legal entity?

  • corporation
  • franchise
  • partnership
  • sole partnership

13. Which of the following is the process of issuing loans in small amounts?

  • macrolending
  • microlending
  • granting
  • leasing

14. How is a corporation different from a sole proprietorship or partnership?

  • A corporation has only one or two owners.
  • A corporation is usually owned by one person.
  • A corporation requires a legal charter with the state.
  • The owners (stockholders) have limited liability.

15. What is a Sole Proprietorship?

  • Business owned by president
  • Business owned by several companies
  • Business owned by one person
  • Business owned by a company

16. What is the most common form of business ownership?

  • Corporation
  • Company
  • Sole Proprietorship
  • LLC

17. What is the name of a person who owns part of a corporation?

  • Stakeholder
  • Shareholder
  • Trust Agent
  • Chairman

18. Which business depends on just one person for the skills and talents to run the business?

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

19. Which of the following is a disadvantage of franchise?

  • assistance from a parent company
  • name recognition
  • shared advertising expenses
  • must follow parent company business structure

20. A _______ forms boards to act as governing bodies. It is the most complicated form of business.

  • franchise
  • partnership
  • sole proprietorship
  • corporation

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.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

22. This type of organization is a legal entity separate from its owners.

  • Sole proprietorship
  • Partnership
  • Corporation
  • Franchise

23. A _____ is owned and operated by one individual; an example would be a plumber.

  • franchise
  • partnership
  • sole propietorship
  • corporation

24. Which statement is false

  • A sole proprietorship type of business ends when any time owner decides to end it
  • A sole proprietorship type of business ends when owner dies
  • A sole proprietorship never ends
  • none of the above

25. Sole Proprietorships will automatically dissolve when the owner

  • dies
  • gets married
  • gets divorced
  • bring their children in the business

26. Information needed to prepare an income statement's revenue section is obtained from a work sheet's Account Title column and

  • Income Statement Debit Column
  • Income Statement Credit Column
  • Balance Sheet Debit Column
  • Balance Sheet Credit Column

27. Information needed to prepare a balance sheet liabilities section is obtained from a work sheet's Account Title column and

  • income statement debit column
  • income statement credit column
  • balance sheet debit column
  • balance sheet credit column

28. An amount written in parentheses on a financial statement indicates an estimate.

  • True
  • False

29. This type of business is owned by one person.

  • Partnership
  • Sole Proprietorship
  • Corporation
  • Franchise

30. This type of business is a contractual agreement with a parent company to sell its products/services in an area.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

31. Owners share the risks and the profits.

  • Proprietorship
  • Partnership
  • Corporation
  • None of the above

32. Owned by two or more individuals.

  • Proprietorship
  • Partnership
  • Corporation
  • None of the above

33. Disadvantages of this business type include: needs a partnership agreement, partners might not get along, owners share profits, unlimited liability.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

34. McDonald's and Burger King are examples of....

  • Sole Proprietorships
  • Partnerships
  • Corporations
  • Franchises

35. Disadvantages of this type of business include: company is taxed on profits, regulated by the government, and hard to start.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

36. Advantages of this type of business include: easy to start, and you can rely on a good company name and expertise.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

37. The area of accounting which focuses on reporting information to internal users.

  • Financial Accounting
  • Payroll Accounting
  • Managerial Accounting
  • Accounts Payable Accounting

38. A comparison between two components of financial information.

  • Financial ratio
  • Ratio analysis
  • Money ratio
  • Cash ratio

39. This type of business is owned by many people called stockholders.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

40. Advantages of this business include: easier to get money from the bank to start, share skills and share risks.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

41. Which type of business allows the owner to keep all of the profit for him/herself?

  • Partnership
  • Franchise
  • Sole Proprietorship
  • Corporation

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?

  • Sole Proprietorship
  • Partnership
  • Franchise
  • Corporation

43. No paperwork (charter or agreement) is required to start which type of business?

  • Partnership
  • Franchise
  • Sole Proprietorship
  • Corporation

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.

  • Sole Proprietorship
  • Partnership
  • Corporation
  • Franchise

45. ___________ are words, symbols, names or devices used to specify the source of the goods, and are used to differentiate them from others.

  • copyrights
  • patents
  • licenses
  • trademarks

46. A _____ is the right or license to sell a company's product or service at a designated location; an example would be McDonalds.

  • franchise
  • partnership
  • sold prprietorship
  • corporation

47. A _____ is a legal agreement between two or more people, and is the least common form of business.

  • franchise
  • partnership
  • sole prorietorship
  • corporation

48. Words, symbols, names or devices used to specify goods and differentiate one good from another are which of the following?

  • Trademark
  • Domain names
  • Patents
  • Copyrights

49. For starting Sole proprietorship, expert persons and enough capital are required.

  • True
  • False

50. The sole trade is useful for beauty parlour.

  • True
  • False

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