Question

In which type of business does one person furnish all of the capital and personally assume all of the liability, and all of the profits go to the owner?

1) Sole proprietorship
2) Partnership
3) Corporation
4) Limited liability company

Answer 1

A sole proprietorship is a business structure where one person provides the capital, is fully liable, and receives all the profits. They are easy to start and manage, offering complete control, but the owner faces unlimited liability, risking personal assets.

Step-by-step explanation:

The type of business in which one person furnishes all the capital, personally assumes all of the liability, and retains all profits is a sole proprietorship. In this business structure, the owner is not separate from the entity, making them responsible for all debts and liabilities. The sole proprietor has the autonomy to manage the business and is entitled to all the profits, but they also bear the risks of unlimited liability. This means that their personal assets are at risk in the event the business incurs debt or legal issues. Sole proprietorships are easy to start, manage, and offer the incentive of direct control over all decisions.

One significant distinction of a sole proprietorship is that it does not afford the owner any liability protection. If the business fails or faces legal issues, the owner's personal assets can be used to settle the business's obligations. Despite this risk, many choose to start a sole proprietorship for its simplicity and complete control.