Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

Which of the following is a significant disadvantage of owning a sole proprietorship?

Double taxation of profits

Complex regulatory requirements

Limited control over business decisions

Unlimited personal liability for business debts

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Verified step by step guidance

Understand the concept of a sole proprietorship: A sole proprietorship is a business structure where a single individual owns and operates the business. It is the simplest form of business ownership and does not require formal registration.

Review the advantages of a sole proprietorship: These include full control over business decisions, ease of setup, and direct access to profits without corporate taxation.

Identify the disadvantages of a sole proprietorship: The most significant disadvantage is unlimited personal liability. This means the owner is personally responsible for all business debts and obligations, which can put personal assets at risk.

Compare the incorrect options: Double taxation of profits applies to corporations, not sole proprietorships. Complex regulatory requirements are more common in corporations or partnerships. Limited control over business decisions is not applicable to sole proprietorships, as the owner has full control.

Conclude that the correct answer is 'Unlimited personal liability for business debts,' as this is the defining disadvantage of owning a sole proprietorship.