True/False
Indicate whether the
statement is true or false.
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1.
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Sole proprietorships have a separate legal
existence from their owners.
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2.
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Businesses owned by two or more individuals can
also qualify as sole proprietorships.
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3.
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Most businesses fail within one year of their
founding.
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4.
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Sole proprietorships are the easiest type of
business to create.
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5.
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Sole proprietorships offer business owners several
distinct tax advantages.
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6.
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Lending institutions routinely refuse to finance
sole proprietorships.
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7.
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Sole proprietors are personally liable for business
debts and judgments.
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8.
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Sole proprietorships can survive the death of their
owners.
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9.
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Sole proprietorships cannot hire
employees.
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10.
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Tax evasion is a common temptation for sole
proprietorships.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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11.
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Underreporting income from a
business.
a. | Tax liability | b. | Tax consequences | c. | Tax
evasion | d. | None of the above |
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12.
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To which of the following inspections may a new
business be subject?
a. | Safety | b. | Health | c. | Zoning | d. | All of the
above |
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13.
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A number issued by the Internal Revenue Service, it
identifies tax accounts held by businesses, including sole proprietorships, partnerships,
corporations, and many others; required on many tax and other business filings.
a. | 1040 | b. | Employer Identification Number | c. | Social Security Number | d. | Accession
Number |
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14.
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Which of the following is typically not a concern
for a sole proprietorship?
a. | Tax consequences of profits and
losses | b. | Obtaining financing | c. | Filings with the Secretary of State | d. | Time commitment to run the business |
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15.
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The liability that a sole proprietor has for all
business-related debts and judgments.
a. | Personal liability | b. | Limited liability | c. | Joint and several
liability | d. | Assumable
liability |
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16.
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On the death of a sole proprietor, what happens to
the business?
a. | It continues until dissolved by judicial
decree | b. | It continues to function because it is an artificial
person | c. | It ceases to function because the sole proprietor is the
source of business authority | d. | None of the
above |
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17.
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Each of the following is a common problem faced by
sole proprietorships except:
a. | Extensive personal commitment to run the
business | b. | Financial obligations of running the
business | c. | The fact that the business will not survive the
owner | d. | What to do with excessive
funds |
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18.
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If a sole proprietor files for protection under the
bankruptcy laws, what effect does this have on the business?
a. | It has no effect on the
business. | b. | It also places the business under bankruptcy
protection. | c. | It severs all ties
between the owner and the business | d. | A and
B |
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19.
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Each of the following is a feature that makes a
sole proprietorship attractive except:
a. | Personal liability for business
debts | b. | Freedom to engage in various
businesses | c. | Complete control
over the business | d. | All profits are
passed directly through to the owner |
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20.
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Why is obtaining financing so difficult for new
businesses?
a. | Because banks are reluctant to loan money to any type of
business | b. | Because most new businesses fail within one
year | c. | Because lenders are legally barred from lending money to
businesses | d. | All of the
above |
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