Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which is a characteristic of a sole proprietorship?

1. The owner has limited liability

2. It is owned and managed by a single individual

3. It requires multiple owners

4. It is governed by a partnership agreement

The correct answer is: It is owned and managed by a single individual

A sole proprietorship is indeed defined as being owned and managed by a single individual. This structure is the simplest form of business organization, where one person is responsible for all aspects of the business, from decision-making to profits and liabilities. This characteristic allows for complete control over the business and a direct connection to all earnings, but it also means that the owner has unlimited liability for any debts or legal actions against the business. The other options do not accurately represent the nature of a sole proprietorship. Limited liability is characteristic of corporations, not sole proprietorships. A requirement for multiple owners would indicate a partnership or a corporation, which directly contradicts the concept of a sole proprietorship. Finally, a partnership agreement is specific to partnerships, which involve more than one owner, and does not apply to sole proprietorships.