Which statement about a sole proprietorship is true?

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Prepare for the AAMI Small Business Management Test with flashcards and multiple choice questions; each question comes with hints and explanations. Get exam ready!

Multiple Choice

Which statement about a sole proprietorship is true?

Explanation:
A sole proprietorship means one person owns and runs the business, with no legal separation between the owner and the business. Because of that, the owner bears unlimited liability and must absorb all losses and debts of the business. That makes the statement true. The other options describe features that don’t apply to this structure: there isn’t limited liability (unlike corporations or some LLCs), it’s not government-owned, and it doesn’t require multiple owners—it’s owned by a single person.

A sole proprietorship means one person owns and runs the business, with no legal separation between the owner and the business. Because of that, the owner bears unlimited liability and must absorb all losses and debts of the business. That makes the statement true. The other options describe features that don’t apply to this structure: there isn’t limited liability (unlike corporations or some LLCs), it’s not government-owned, and it doesn’t require multiple owners—it’s owned by a single person.

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