Which of the following is an advantage of a Sole Proprietorship?

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Study for the Texas Aandamp;M University (TAMU) ACCT229 Exam. Get exam-ready with flashcards, detailed explanations, and multiple choice questions. Enhance your understanding and boost your confidence!

A sole proprietorship is known for its simplicity and ease of formation, which aligns perfectly with the selected answer. Establishing a sole proprietorship requires minimal legal formalities, making it an accessible option for individuals looking to start a business. Typically, one would only need to register a business name, acquire any necessary permits or licenses, and begin operations. This straightforward setup is appealing to many entrepreneurs, especially those who are starting small and want to avoid the complexities associated with other business structures like partnerships or corporations.

The concept of limited liability applies to corporations and certain forms of partnerships but does not apply to sole proprietorships. In a sole proprietorship, the owner is personally liable for all debts and obligations of the business. Double taxation is a characteristic of corporations, where income is taxed at both the corporate level and again when distributed as dividends to shareholders, which does not occur in sole proprietorships as income is reported on the owner's personal tax return. Lastly, continuity of life refers to the ability of a business to continue operating beyond the owner's involvement, which is typically a weakness in sole proprietorships, as the business might cease to exist if the owner dies or decides to close it.

In summary, the straightforward nature of starting a sole propriet