Chapter 3 Soletradership Flashcards

1
Q

What is the definition of sole proprietorship?

A

A type of business organization in which one person owns and operates the business.

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2
Q

List five examples of sole proprietorships.

A
  • Retailer
  • Painters
  • Carpenter
  • Tourist Guide
  • Barber
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3
Q

What does unlimited liability mean for the owner in a sole proprietorship?

A

The sole proprietor is responsible for the payments of the liabilities from personal assets in case of insolvency or non-payment of business debts.

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4
Q

State five characteristics of sole proprietorship.

A
  • Sole ownership
  • Easy formation
  • Whole profit
  • Secrecy
  • Easy transfer
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5
Q

What are five advantages of sole proprietorship?

A
  • Easy formation
  • Quick decisions
  • Business secrecy
  • Easy dissolution
  • Flexibility
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6
Q

List five disadvantages of sole proprietorship.

A
  • Shortage of capital
  • Unlimited liabilities
  • Management problems
  • No legal protection
  • Not durable
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7
Q

Why is there total independence in sole proprietorship?

A

The control and supervision of the business remains in the hands of one person, with no interference from others.

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8
Q

Why does the single owner feel satisfied with business affairs in sole proprietorship?

A

The owner feels personal satisfaction as all business activities are accomplished under their supervision.

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9
Q

How is profit distributed in a sole proprietorship?

A

The single owner bears full risk and thus receives total benefits as well as bears full loss.

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10
Q

Why do people have less confidence in sole proprietorship?

A

The owner does not publish business accounts, and there are no legal restrictions to control or wind up the business.

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11
Q

What is the legal standing status of sole proprietorship?

A

The business has no separate legal entity from the owner; legal action can only be taken against the owner.

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12
Q

Why is the life of sole proprietorship limited?

A

Its existence relies on the health and participation of the owner; wrong decisions or sudden death can halt activities.

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