Which of the following is true about a sole proprietorship?
A)A sole proprietorship is a company owned by two or more individuals.
B)The owner's liability is limited to the amounts invested in the business.
C)Income from a sole proprietorship is distributed to the owner in the form of a dividend.
D)The income from a sole proprietorship is taxed on the owner's personal income tax return.

Question

Quizplus · Accepted Answer

A sole proprietorship is owned and operated by one individual, and the income from the business is considered personal income for tax purposes. Therefore, the income is reported on the owner's personal income tax return. Choices A and B are incorrect because a sole proprietorship is owned by only one individual and the owner's liability is unlimited, meaning personal assets are at risk in the event of business debts. Choice C is incorrect because income from a sole proprietorship is not distributed in the form of a dividend, as there are no shareholders in a sole proprietorship.

Which of the Following Is True About a Sole Proprietorship