Question

b. main ideas
directions: write the letter of the correct answer in the blank provided.

1. if a sole proprietorship fails, the owner of the business:

a. must pay all the business debts. c. must pay off the investors.
b. has to do a lot of legal work to d. must wait 10 business days before
close the business. starting another business.

1. which of the following is true of sole proprietorships?

a. they have only one employee. c. they must have a business license.
b. they are owned and managed d. they dont pay fringe benefits to
by an individual. employees.

1. a major disadvantage of the sole proprietorship is that

a. the business cannot be sold off if it does well.
b. the business can be difficult to relocate.
c. the sole proprietor may have problems borrowing money from a bank.
d. no one can work for the business owner.

1. a major advantage of a sole proprietorship is that

a. the owner has full authority over business decisions.
b. the owner has no liability for the debts of the business.
c. human capital is unlimited.
d. it is relatively easy to find and keep good employees.
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Explanation:

• Question 7: In a sole proprietorship, the owner has unlimited liability. This means they are personally responsible for all business debts. So, if the business fails, the owner must pay all the business debts.
• Question 8: By definition, sole proprietorships are owned and managed by an individual. Having a business license (a) is not always a universal requirement across all sole - proprietorships in all regions. Not paying fringe benefits (d) is a characteristic but not the most defining one. And while some may need to follow certain legal processes to close (b), the key defining feature is ownership and management.
• Question 9: One of the major disadvantages of a sole proprietorship is that it can be difficult for the sole proprietor to borrow money from a bank. This is because there is no separation between personal and business finances in the eyes of lenders in many cases, and the business may lack the resources and stability (compared to larger entities) that banks look for. The business can be sold (a is wrong), relocation difficulty (b) is not as major a disadvantage as borrowing issues, and there is work (d is wrong).
• Question 10: A major advantage of a sole proprietorship is that the owner has full authority over business decisions. In a sole proprietorship, the owner has unlimited liability (so b is wrong), human capital is limited (c is wrong as it's a disadvantage), and finding and keeping good employees (d is a disadvantage as sole - proprietorships may have limited resources for employee retention compared to larger firms).

Answer:

1. a
2. b
3. c
4. a