Question

In a sole proprietorship, the profits earned by the business are:

A. taxed as income for the business, but exempt from the personal income tax paid by the owner.
B. taxed at the lowest corporate rate.
C. the property of the owner, except for taxes owed to the government.
D. tax-free if the appropriate exemption is filed with the local government.

Answer 1

In a sole proprietorship, the profits earned by the business are the property of the owner, except for taxes owed to the government. The correct option is C.

Step-by-step explanation:

In a sole proprietorship, the profits earned by the business are the property of the owner, except for taxes owed to the government. The correct answer is C. the property of the owner, except for taxes owed to the government.

In a sole proprietorship, the business is not a separate entity from the owner. This means that the owner is personally responsible for all debts and liabilities of the business. However, the owner is also entitled to all profits generated by the business.

For tax purposes, the profits earned by the business are reported as the owner's personal income and are subject to personal income tax. The correct option is C.