Which one of the following statements is correct with respect to sole proprietorships?
A)The sole proprietor is restricted to service-type businesses.
B)A sole proprietorship involves limited liability.
C)The sole proprietor is a society under the Societies Act.
D)A sole proprietorship involves unlimited liability for the proprietor.
E)A sole proprietorship is a separate legal entity with one shareholder.

Question

Quizplus · Accepted Answer

A sole proprietorship involves unlimited liability for the proprietor, meaning the owner is personally responsible for all debts and obligations of the business. Choice A is incorrect because sole proprietors can operate a variety of businesses, not just service-type ones. Choice B is incorrect because there is no limited liability protection for sole proprietors. Choice C is incorrect because a sole proprietorship is not a society under the Societies Act. Choice E is incorrect because a sole proprietorship is not a separate legal entity, meaning the business and owner are not legally distinct.

Which One of the Following Statements Is Correct with Respect