Sole Proprietorship: Advantages and Disadvantages

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What is the primary advantage of a sole proprietorship in terms of decision-making?

The owner has unlimited resources to invest in the business.
The owner has to share the decision-making authority with others.
The owner has the sole decision-making authority. (correct)
The owner has to seek approval from a board of directors.

What is the primary risk of unlimited liability in a sole proprietorship?

The owner's personal assets can be used to pay the debts of the business. (correct)
The owner's personal assets are not affected by the business debts.
The business may not be able to pay its obligations.
The business may have to close down.

Why is it easy for a sole proprietor to maintain secrecy in the business?

Because the owner has the sole decision-making authority and is not legally required to publish business accounts. (correct)
Because the owner has to share information with others.
Because the owner has to publish business accounts.
Because the owner has limited resources.

What is the implication of a sole proprietorship having no separate legal entity?

The business is dependent on the owner's life and will cease to exist if the owner dies. (B) Signup and view all the answers

What is the primary limitation of a sole proprietorship in terms of raising capital?

The owner has limited resources to the extent of his personal assets and borrowings. (B) Signup and view all the answers

What is the primary advantage of a sole proprietorship in terms of incentive?

The owner gets a maximum incentive if he/she performs better. (B) Signup and view all the answers

What happens to the business if the sole proprietor falls ill, becomes bankrupt or insolvent, or dies?

The business may come to an end (C) Signup and view all the answers

What is a disadvantage of a sole proprietorship due to the proprietor's lack of skills and expertise?

The proprietor is burdened with too many tasks (D) Signup and view all the answers

Why may a sole proprietor make wrong decisions?

Because they have to make all the decisions alone (A) Signup and view all the answers

What type of business is suitable for sole proprietorship?

Small-scale businesses (B) Signup and view all the answers

What is a partnership?

A business owned by two or more people (D) Signup and view all the answers

Why do many people choose sole proprietorship despite its disadvantages?

Because it has many advantages (C) Signup and view all the answers

What is the role of an active partner in a partnership firm?

He acts as an agent of all the other partners on a day to day basis. (A) Signup and view all the answers

What is required of an active partner who wishes to retire from the firm?

He must give a public notice about his retirement. (D) Signup and view all the answers

What is a characteristic of a dormant partner?

He does not participate in the daily functioning of the partnership. (C) Signup and view all the answers

What happens if an active partner retires without giving a public notice?

He will be liable for all acts done by other partners after his retirement. (C) Signup and view all the answers

What is true about a nominal partner?

He lends his name to the partnership. (D) Signup and view all the answers

What is the responsibility of a dormant partner in case of retirement?

He need not give a public notice of his retirement. (C) Signup and view all the answers

What is the prescribed minimum paid-up capital for One Person Companies (OPCs) as per the Companies Act, 2013?

No minimum paid-up capital prescribed (C) Signup and view all the answers

What is a unique feature of One Person Companies (OPCs) under the Companies Act?

Special privileges and exemptions (B) Signup and view all the answers

In what scenario can a One Person Company (OPC) convert to another type of company?

After two years of incorporation (C) Signup and view all the answers

What is a mandatory requirement for the name of a One Person Company (OPC)?

The words 'One Person Company' in brackets (A) Signup and view all the answers

Who is eligible to form a One Person Company (OPC) in India?

Only Indian citizens and residents (B) Signup and view all the answers

What is the purpose of nominating a person in the memorandum of association of a One Person Company (OPC)?

To take over as the member in case of death or incapacitation (B) Signup and view all the answers

What is the maximum number of OPCs a natural person can be a member or nominee of at any point in time?

One (C) Signup and view all the answers

What is a common characteristic between OPC and sole proprietorship?

Single ownership (B) Signup and view all the answers

Why can't minors be members or nominees of OPCs?

Legal prohibition (C) Signup and view all the answers

What is the key difference between OPC and sole proprietorship?

Liability protection (C) Signup and view all the answers

What is the implication of OPC being a separate legal entity?

Promoter's assets are protected (B) Signup and view all the answers

What does the term 'company' essentially imply?

An association of persons for some common object (A) Signup and view all the answers