Starting a new business from scratch rather than purchasing an existing business means the entrepreneur avoids undesirable precedents, policies, procedures, and legal commitments of the existing firm.

• A. It is false.
• B. It may still inherit some obligations.
• C. It is true.
• D. It depends on circumstances.

Answer: (C)

When you start a new venture from scratch, you have the opportunity to set your own policies, procedures, and governance from the ground up. Because you’re forming a new legal entity rather than purchasing the existing business, the old firm’s precedents and commitments don’t automatically transfer to you. That means you’re not tied to the previous policies or legal obligations, giving you a clean slate to design operations and compliance for your own goals. In practice, this reduces exposure to the prior firm’s practices, so the statement is true.