Which statement best describes a sole proprietorship?

Which statement best describes a sole proprietorship?

• A. The business, or any part of it, can be sold, altered, or exchanged at will.
• B. Ownership cannot be transferred once established.
• C. The business must be a corporation for tax purposes.
• D. All profits must be reinvested.

Answer: (A)

A sole proprietorship is owned by a single person who controls all aspects of the business and there is no separate legal entity between the owner and the business. Because of that, the owner can freely transfer ownership by selling the business or its assets, make changes to how the business is run, or exchange components as part of a sale or reorganization. This reflects the flexible, owner-driven nature of a sole proprietorship, which is not a separate corporate entity for tax purposes, and where profits flow directly to the owner rather than to a corporate entity.

A sole proprietorship is owned by a single person who controls all aspects of the business and there is no separate legal entity between the owner and the business. Because of that, the owner can freely transfer ownership by selling the business or its assets, make changes to how the business is run, or exchange components as part of a sale or reorganization. This reflects the flexible, owner-driven nature of a sole proprietorship, which is not a separate corporate entity for tax purposes, and where profits flow directly to the owner rather than to a corporate entity.