Which one of the following statements concerning a sole proprietorship is correct?

A) A sole proprietorship is the least common form of business ownership.
B) The profits of a sole proprietorship are taxed twice.
C) The owners of a sole proprietorship share profits as established by the partnership agreement.
D) The owner of a sole proprietorship may be forced to sell his/her personal assets to pay company debts.
E) A sole proprietorship is often structured as a limited liability company.

Question

Idowu Omiyale · Accepted Answer

Final Answer : D, Explanation :  The owner of a sole proprietorship is personally liable for the debts of the business, which means that the owner's personal assets can be used to pay off company debts. This is a major disadvantage of this form of business ownership. A is incorrect as a sole proprietorship is the most common form of business ownership. B is incorrect as the profits of a sole proprietorship are taxed only once, as personal income of the owner. C is incorrect as a sole proprietorship is owned by one person, so there is no partnership agreement or sharing of profits. E is incorrect as a sole proprietorship is not structured as a limited liability company.

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