Sole Proprietorship Business
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Sole Proprietorship Business

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Questions and Answers

What is the primary source of capital for a sole proprietorship?

  • Investment from external shareholders
  • Personal savings and borrowed funds (correct)
  • Government grants
  • Public stock offerings
  • What is the key characteristic of the liability of a sole proprietorship?

  • Unlimited liability, both business and personal assets are at risk (correct)
  • Limited liability, only business assets are at risk
  • Joint liability, shared with other business partners
  • No liability, the owner is not responsible for debts
  • What is the primary role of a sole proprietor in the business?

  • Investor and shareholder only
  • Manager, labourer, capitalist, and entrepreneur (correct)
  • Capitalist and entrepreneur only
  • Manager and labourer only
  • What is the legal status of a sole proprietorship?

    <p>Not a legal entity, regarded as one person with the owner</p> Signup and view all the answers

    What is the typical industry where sole proprietorships are commonly found?

    <p>Retailing business</p> Signup and view all the answers

    What is the primary motive of a sole trader in business?

    <p>To make a profit</p> Signup and view all the answers

    What is a characteristic of a sole trader's method of withdrawing capital?

    <p>Can be done anytime without consulting anyone</p> Signup and view all the answers

    Why does a sole trader not need a board of directors?

    <p>Because they are the sole owner</p> Signup and view all the answers

    What is an advantage of a sole proprietorship in terms of its establishment?

    <p>It can be established quickly and easily</p> Signup and view all the answers

    What is a benefit of a sole proprietor's ability to make quick decisions?

    <p>It allows for flexibility in response to changing circumstances</p> Signup and view all the answers

    Study Notes

    Definition and Characteristics of a Sole Proprietorship

    • A sole proprietor is an individual who owns and manages a business, using their own capital and labor, and receives all the profit or loss.
    • Also known as a "one-man business" or "sole trader".

    Features of a Sole Proprietorship

    • Ownership: Owned by one person.
    • Liability: Unlimited liability, meaning both business and personal assets can be sold to offset debt.
    • Sources of Capital or Finance: Owner provides capital through personal savings, intended capital, credit, borrowing from relatives, banks, etc.
    • Legal Entity: Not a legal entity; business and owner are regarded as one person.
    • Motive: Primary motive is to make a profit.
    • Method of Withdrawing Capital: Owner can withdraw capital anytime without consulting anyone.
    • No Board of Directors: Owner makes all decisions.

    Sources of Funds for a Sole Trader

    • Personal savings
    • Borrowing from friends and relatives
    • Credit purchases from manufacturers or wholesalers
    • Donations from friends and relatives

    Advantages of a Sole Proprietorship

    • Low Capital Requirement: Can be established quickly and easily with small capital.
    • Easy to Establish: No formalities or legal processes required.
    • Ownership of All Profit: Sole proprietor retains all profit.
    • Quick Decision-Making: Owner can take quick decisions without consulting anyone.
    • Easy to Withdraw Assets: Business can be liquidated easily.
    • Formulates All Policies Alone: Owner determines business policies and goals.
    • Independence and Personal Freedom: Owner has complete control over business decisions.

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    Description

    This quiz covers the basics of a sole proprietorship, a business owned and managed by one person, including its characteristics and types of industries where it is commonly found.

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