Company lawLesson 1 of 2 in the course Business Structure Options: Legal, Tax, and Risk Issues

Sole Proprietorships: Formation, Assumed Names, Liability, and Taxation

5 flashcards · 5 quiz questions · 5 match pairs · 5 fill-in sentences · English

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Summary

A sole proprietorship is the simplest business structure for an individual owner. This lesson explains how ownership works, why this structure is easy to start, and what an assumed business name does—and does not—change.

A sole proprietorship is a business owned and managed by one individual. The owner is called a sole proprietor. Unlike a corporation or limited liability company (LLC), the business is generally not legally separate from its owner.

All flashcards

What is a sole proprietorship?
A business owned and managed by one individual. It is generally not legally separate from its owner.
Who is a sole proprietor?
The individual who owns and manages a sole proprietorship.
Why can a sole proprietorship be inexpensive to start?
A person may become a sole proprietor by beginning business activity without paying to form a separate entity, though permits or other requirements may still apply.
What does DBA mean?
DBA means “doing business as.” It is a filing that can allow an owner to operate under an assumed business name.
Does a DBA provide limited liability?
No. A DBA changes the name used for business but does not create an LLC or corporation or otherwise provide liability protection.

Quiz questions

  1. Who owns and manages a sole proprietorship?Answer: One individual, known as the sole proprietor.
  2. Why is a sole proprietorship often easy to form?Answer: A person may begin operating without forming a separate legal entity.
  3. What does filing a DBA generally allow a sole proprietor to do?Answer: Conduct business under a name different from the owner's legal name.
  4. A sole proprietorship cannot pay one of its debts. What may follow from the owner's legal relationship to the business?Answer: The owner may be personally responsible for the debt.
  5. What may a sole proprietor sell when transferring a business?Answer: Business assets, subject to applicable agreements and rules.

Based on Entrepreneurship by Michael Laverty, Chris Littel (OpenStax), licensed CC BY 4.0. Adapted into a summary, flashcards and quizzes.

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