23
QuizMultiple Choice

Business and Government — Test

Question 23 • CMS 2026-2027 Economics and Personal Finance INITIAL CREDIT

Which best describes the difference between sole proprietorships and partnerships?

Answer
A
Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities.
B
Sole proprietors split profits and share liabilities, while partners keep all profits and have unlimited liability.
C
Sole proprietors pay taxes only on business profits, while partners do not have to pay taxes on profits.
D
Sole proprietors share responsibilities, while partners are responsible for only a portion of the business.

Explanation

A sole proprietorship has one owner, who keeps the business’s profits and is personally responsible for its debts, meaning the owner has unlimited liability. In a partnership, two or more owners generally share the profits and liabilities. Therefore, choice A, “Sole proprietors keep all profits and have unlimited liability, while partners split profits and share liabilities,” is correct.

AI-written and checked against the verified answer.

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