5 Questions
Explain the concept of business ownership known as sole proprietorship.
A sole proprietorship is owned by one person and operates for their benefit. The owner operates the business alone and may hire employees.
What is the difference between a corporation and a sole proprietorship in terms of liability?
Corporations provide limited liability for their owners/members, while sole proprietors are personally responsible and liable for debts incurred by the business.
What is the taxation system for businesses and corporates?
The proprietor of a business is personally taxed on all income from the business, while corporations are subject to corporate tax rates.
How do creditors treat the debts incurred by a business with a sole proprietorship?
If the business acquires debts, the creditors can go after the owner's personal possessions.
What are some common forms of business ownership?
Common forms of business ownership include sole proprietorship, partnership, and corporation.
Study Notes
Business Ownership: Sole Proprietorship
- A sole proprietorship is a type of business ownership where one individual owns and operates the business.
- The business and the owner are not separate entities, and the owner has unlimited personal liability.
Liability: Corporation vs. Sole Proprietorship
- In a corporation, the owners (shareholders) have limited liability, meaning their personal assets are protected in case the business incurs debt or is sued.
- In a sole proprietorship, the owner has unlimited personal liability, meaning their personal assets can be seized to pay off business debts.
Taxation System for Businesses and Corporates
- Businesses and corporates are taxed differently, with corporations being taxed on their profits, while sole proprietors report business income on their personal tax returns.
- Sole proprietors are considered self-employed and pay self-employment taxes on their business income.
Creditor Treatment of Sole Proprietorship Debts
- Since the business and owner are not separate entities, creditors can pursue the owner's personal assets to collect debts incurred by the business.
- This means the owner's personal assets, such as their home or savings, can be used to pay off business debts.
Common Forms of Business Ownership
- Sole Proprietorship: one individual owns and operates the business.
- Partnership: two or more individuals own and operate the business together.
- Corporation: a separate legal entity from its owners, with limited liability for shareholders.
- Limited Liability Company (LLC): a hybrid of partnership and corporation, with limited liability for owners.
Test your knowledge of essential business concepts and practices with this quiz. Explore topics such as business ownership, liability, and taxation.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
