Which of the following is true about a sole proprietorship?
A) It is subject to corporate income tax.
B) The owner must file a tax return on behalf of the business.
C) The owner reports income and expenses on the owner's own tax return.
D) Sole proprietorships face double taxation.

Question

Quizplus · Accepted Answer

Sole proprietorships are not taxed as separate entities. Instead, the owner reports the business's income and expenses on their personal tax return, using Schedule C of Form 1040. This avoids the double taxation that corporations can face, where both the corporation's profits and the dividends paid to shareholders are taxed.

Which of the Following Is True About a Sole Proprietorship