Multiple Choice
Barry owns a small business by himself and is personally liable for all the debts of the business. What type of business organization does Barry most likely have?
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1. Introduction to Accounting
Business Organization
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Which type of business organization is owned by a single individual?
A
Sole proprietorship
B
Partnership
C
Limited liability company (LLC)
D
Corporation
Verified step by step guidance1
Understand the concept of business organizations: Business organizations are structures established to conduct business activities. Common types include sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
Define sole proprietorship: A sole proprietorship is a business owned and operated by a single individual. It is the simplest form of business organization and does not require formal registration beyond local licensing.
Compare sole proprietorship with other types: Partnerships involve two or more individuals sharing ownership, LLCs provide limited liability protection to owners, and corporations are separate legal entities owned by shareholders.
Identify the key characteristic of sole proprietorship: The defining feature is that it is owned by one person, who has full control and responsibility for the business's operations and liabilities.
Conclude that the correct answer is 'Sole proprietorship,' as it matches the description of a business owned by a single individual.
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