Which one of the following statements concerning a sole proprietorship is correct?
A)The ability to raise capital is limited by the owner's personal wealth.
B)The proprietorship pays taxes at the corporate tax rate.
C)The ownership of the firm is easy to transfer to another individual.
D)The company must pay income taxes separate from the taxes paid by the owner.
E)The legal costs to form a sole proprietorship are quite substantial.

Question

Quizplus · Accepted Answer

A sole proprietorship is owned by one individual who is personally liable for all the firm's debts. Therefore, the ability to raise capital is limited by the owner's personal wealth. There is no separate legal entity, and the income earned by the business is reported on the owner's personal income tax return at the individual tax rate. Additionally, there are generally low legal costs associated with forming a sole proprietorship compared to other forms of business ownership.

Which One of the Following Statements Concerning a Sole Proprietorship