MULTIPLE CHOICE QUESTIONS Sole Proprietorships 81.The major disadvantage of a sole proprietorship

Question : MULTIPLE CHOICE QUESTIONS Sole Proprietorships 81.The major disadvantage of a sole proprietorship : 1849933


Sole Proprietorships

81.The major disadvantage of a sole proprietorship is:

a.The difficulty and cost of formation.

b.The unlimited liability for the business’s debts.

c.The sharing of management authority with others.

d.The difficulty in transferring ownership to others.

82.If a business, having one owner, is started without the owner choosing any particular form of business organization, that business will be:

a.Nonexistent until the form of organization is chosen.

b.A corporation.

c.A joint venture.

d.A sole proprietorship.

e.A franchise.

83.A sole proprietor has unlimited liability for:

a.Personal, but not business debts.

b.Business, but not personal debts.

c.Both business and personal debts.

d.Neither business nor personal debts.

84.Does a sole proprietor have unlimited liability for any of the liabilities of the business?


b.Yes, but only for ordinary recurring types of expenses

c.Yes, but only for foreseeable expenses and liabilities

d.Yes, but only for debts if the owner specifically assumed personal liability when the debt was incurred

e.Yes, for all debts of the business

85.The major advantage of a sole proprietorship is:

a.Easy to create.

b.Limited liability.

c.Need not file under a fictitious name statute.

d.Easy to raise capital.

86.In order to form a sole proprietorship, the owner must:

a.Apply to the secretary of state and wait for approval.

b.Register with the secretary of state, but no separate approval is required.

c.Execute a sole proprietorship agreement.

d.Register with the Internal Revenue Service.

e.None of the above

87.Which of the following is true about the use of trade names by a sole proprietor in most states?

a.The use of a trade name by a proprietor is not permissible because the business is not a separate entity from the owner.

b.The use of a trade name is permissible, but permission must first be obtained from the state.

c.A trade name is permissible, but it must include the full name of the proprietor.

d.Trade names are generally permissible but must be registered with the state.

88.Martha started a flower shop as a sole proprietor.  After one year, she was forced to close the shop because business was so bad.  At that time, the business assets totaled $50,000, but the business liabilities totaled $125,000.  Which of the following statements is true?

a.Martha is personally liable for the additional $75,000.

b.Martha’s business creditors can collect only the $50,000 of business assets.

c.Martha’s business creditors can collect only the $50,000 now, but if Martha ever goes into business again, they can get the assets of the new business.

d.Once Martha terminates the sole proprietorship, the business creditors cannot get even the $50,000.

89.Which of the following businesses can be operated as a sole proprietorship?

a.Any business, so long as there are no employees other than the proprietor

b.Any service type business

c.Any business, so long as revenues are not excessively large

d.Any business, so long as the number of employees is not excessively large

e.Any business

90.Mark operates an auto parts shop.  The shop has gone out of business, and all assets have been sold.  The following debts remain:

1.$10,000 owed to suppliers for merchandise that was sold to customers

2.$20,000 owed to suppliers for merchandise that was ruined in an unexpected flood

3.$35,000 owed to a customer who has a final judgment in a product liability suit against the auto parts shop

For which of these debts can Mark be held personally liable?

a.None, they were all business debts

b.1 only

c.1 and 2 only

d.1 and 3 only

e.1, 2, and 3


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