Which of the following is true of sole proprietorships and corporations?
A) It is difficult to transfer ownership of corporations compared to that of sole proprietorships.
B) Income from both forms of organizations are taxed only at the corporate level.
C) Both sole proprietorships and corporations are equally scrutinized and regulated by government bodies.
D) In sole proprietorships, owners have unlimited liability; whereas, in corporations, owners have limited liability.

Question

Quizplus · Accepted Answer

The statement in option D is true. In sole proprietorships, the owner is personally liable for all debts and obligations of the business, whereas in corporations, the liability of the owners (i.e., shareholders) is limited to their investment in the company. On the other hand, option A is false as it is generally easier to transfer ownership in corporations than sole proprietorships. Option B is also false as income from sole proprietorships is taxed at the individual level, while income from corporations are taxed both at the corporate level and the individual level. Option C is subjective and cannot be determined as both forms of organization may be regulated differently depending on the jurisdiction and industry.

Which of the Following Is True of Sole Proprietorships and Corporations