Which of the following is an advantage of a sole proprietorship?

Which of the following is an advantage of a sole proprietorship?

• A. Unlimited liability
• B. No special tax
• C. Difficult to scale
• D. Share profits

Answer: (B)

The advantage of a sole proprietorship that stands out is the absence of special taxes. In this business structure, income generated by the business is reported directly on the owner's personal tax return, which simplifies the tax process. This means that the proprietor is not subject to corporate taxes, which can be a significant financial burden for other business entities. Instead, the profits are taxed once as personal income, making it a more straightforward and often more beneficial tax scenario for the individual running the business. The other options, such as unlimited liability, difficult to scale, and share profits, do not highlight advantages of a sole proprietorship. Unlimited liability indicates that the owner is personally responsible for all business debts, which can be risky. The challenge of scaling is a limitation often faced by sole proprietorships due to their smaller size and reliance on one individual's resources and capabilities. While sole proprietors do keep all profits, they do so without the benefit of sharing the financial risks or responsibilities with partners or investors, which can be seen as a disadvantage in some contexts.

The advantage of a sole proprietorship that stands out is the absence of special taxes. In this business structure, income generated by the business is reported directly on the owner's personal tax return, which simplifies the tax process. This means that the proprietor is not subject to corporate taxes, which can be a significant financial burden for other business entities. Instead, the profits are taxed once as personal income, making it a more straightforward and often more beneficial tax scenario for the individual running the business.

The other options, such as unlimited liability, difficult to scale, and share profits, do not highlight advantages of a sole proprietorship. Unlimited liability indicates that the owner is personally responsible for all business debts, which can be risky. The challenge of scaling is a limitation often faced by sole proprietorships due to their smaller size and reliance on one individual's resources and capabilities. While sole proprietors do keep all profits, they do so without the benefit of sharing the financial risks or responsibilities with partners or investors, which can be seen as a disadvantage in some contexts.