Chapter 3 Soletradership Flashcards
What is the definition of sole proprietorship?
A type of business organization in which one person owns and operates the business.
List five examples of sole proprietorships.
- Retailer
- Painters
- Carpenter
- Tourist Guide
- Barber
What does unlimited liability mean for the owner in a sole proprietorship?
The sole proprietor is responsible for the payments of the liabilities from personal assets in case of insolvency or non-payment of business debts.
State five characteristics of sole proprietorship.
- Sole ownership
- Easy formation
- Whole profit
- Secrecy
- Easy transfer
What are five advantages of sole proprietorship?
- Easy formation
- Quick decisions
- Business secrecy
- Easy dissolution
- Flexibility
List five disadvantages of sole proprietorship.
- Shortage of capital
- Unlimited liabilities
- Management problems
- No legal protection
- Not durable
Why is there total independence in sole proprietorship?
The control and supervision of the business remains in the hands of one person, with no interference from others.
Why does the single owner feel satisfied with business affairs in sole proprietorship?
The owner feels personal satisfaction as all business activities are accomplished under their supervision.
How is profit distributed in a sole proprietorship?
The single owner bears full risk and thus receives total benefits as well as bears full loss.
Why do people have less confidence in sole proprietorship?
The owner does not publish business accounts, and there are no legal restrictions to control or wind up the business.
What is the legal standing status of sole proprietorship?
The business has no separate legal entity from the owner; legal action can only be taken against the owner.
Why is the life of sole proprietorship limited?
Its existence relies on the health and participation of the owner; wrong decisions or sudden death can halt activities.