Deck 2: Sole Proprietorships

Question 1

When a sole proprietor uses an assumed name, some states require that a notice of intent to transact business under an assumed name be published.

Answer 1

True

Question 2

Paralegals who are assisting in providing services to a sole proprietorship should not

A) advise the sole proprietor with regard to the income tax consequences of doing business as a sole proprietor.
B) assist with the preparation of state and fed- eral forms to comply with state and federal taxation requirements.
C) draft and file an application for a certificate of assumed name when that document is required.
D) draft and file an application for employer identification number when that document is required.

Answer 2

A

Question 3

The sole proprietorship is dissolved by filing a certificate of dissolution with the secretary of state.

Answer 3

False

Question 4

A certificate of assumed name is filed to

A) form a sole proprietorship.
B) form an assumed-name entity.
C) create a trademark.
D) give notice of your intent to transact busi- ness under a name other than your own.

Question 5

When hiring an employee, the sole proprietor must

A) file a certificate of assumed name.
B) file a notice with the secretary of state or other appropriate state official.
C) obtain a federal employer identification number.
D) amend the business's certificate of assumed name.

Question 6

The application for employer identification number must be filed with the

A) secretary of state.
B) State Unemployment Insurance Department.
C) Internal Revenue Service.
D) U.S. Department of Labor.

Question 7

A sole proprietorship certificate must be obtained from the secretary of state's office before a sole proprietor can begin transacting business.

Question 8

The sole proprietor's liability for the actions of his or her employee is best described as which of the following: 114
CHAPTER 2 Sole Proprietorships 115

A) A sole proprietor is never responsible for torts committed by the sole proprietor's employee.
B) A sole proprietor is responsible for actions taken by an employee while the employee is acting on behalf of the employer in the normal course of business.
C)
C) Both the sole proprietor and the employee may be liable for torts committed by the employee.
D) Both B and

Question 9

The number of sole proprietorships in the United States is

A) greater than the number of corporations.
B) less than the number of corporations.
C) less than the number of partnerships.
D) about the same as the number of partner- ships.

Question 10

The income of sole proprietorships in the United States is

A) greater than the income of corporations.
B) less than the income of corporations.
C) less than the income of partnerships.
D) about the same as the income of corpora- tions.

Question 11

Advantages to transacting business as a sole proprietorship include

A) double taxation on the income of sole proprietors.
B) limits on the sole proprietor's personal liability.
C) the ease and low cost of starting the business.
D) the sole proprietor's lack of responsibility for actions by employees or agents.

Question 12

Disadvantages to transacting business as a sole proprietorship include

A) double taxation of the sole proprietor's income.
B) personal liability for the debts and obliga- tions of the business.
C) the limited duration of the sole proprietor- ship allowed by state law.
D) costly filing fees for forming the sole proprietorship.

Question 13

A sole proprietorship is considered to be

A) an entity formed to protect the small busi- nessperson from personal liability.
B) an extension of the individual sole pro- prietor.
C) any business organization that is owned, managed, and operated by only one individual.
D) an entity that is easily transferred from one individual to another.

Question 14

The rules of ethics that apply to attorneys may apply to the paralegals who work for them.

Question 15

A sole proprietor may hire any number of employees.

Question 16

A sole proprietor may delegate management and decisions concerning the business to agents and employees.

Question 17

Sole proprietors can attract new employees by offering shares of their business as compensation.

Question 18

Sole proprietorships are created and governed by state statute.

Question 19

A sole proprietor may transfer his or her business to another individual by selling all of his or her shares of stock to that individual.