Which statement about a sole proprietorship is TRUE?

Which statement about a sole proprietorship is TRUE?

• A. The business, or any part of it, can be sold, altered, or exchanged at will.
• B. The business must have at least two owners.
• C. The business is always taxed as a corporation.
• D. The business cannot borrow money.

Answer: (A)

In a sole proprietorship, one person owns and runs the business, with no separate legal entity between the owner and the business. Because there’s no partner or corporation to represent the business, the owner can decide to sell the business or its assets, change its structure, or exchange components as they see fit. That makes the statement about selling, altering, or exchanging at will true. The other ideas don’t fit because a sole proprietorship does not require two owners, so that statement is false. It isn’t automatically taxed as a corporation; profits pass through to the owner and are taxed on the owner’s personal return (unless the owner elects to be taxed as a corporation, which is not the default). It also isn’t restricted from borrowing money; the owner can seek loans, often with a personal guarantee or collateral.

In a sole proprietorship, one person owns and runs the business, with no separate legal entity between the owner and the business. Because there’s no partner or corporation to represent the business, the owner can decide to sell the business or its assets, change its structure, or exchange components as they see fit. That makes the statement about selling, altering, or exchanging at will true.

The other ideas don’t fit because a sole proprietorship does not require two owners, so that statement is false. It isn’t automatically taxed as a corporation; profits pass through to the owner and are taxed on the owner’s personal return (unless the owner elects to be taxed as a corporation, which is not the default). It also isn’t restricted from borrowing money; the owner can seek loans, often with a personal guarantee or collateral.