Question

If the business is designated a sole proprietorship, profits are passed along to the owner. For tax purposes, these profits are accounted for with any other personal income the owner may have accumulated and taxed at the owner's personal income tax rate.
A) true
B) false

Answer 1

Answer:

The correct answer is option A.

Explanation:

A sole proprietorship is a business structure where there is a single owner. The business and owner are not separate entities. The business owner has unlimited liabilities. The business though does not have to pay corporate taxes.  

The profits of a sole proprietorship are passed through to the owner and taxed at the owner's personal tax rate. The sole proprietors are required to estimate their taxes and make quarterly payments to the government or suffer penalties for nonpayment.