CFA Level I · CFA Level I Exam · Organizational Forms, Corporate Issuer Features, and Ownership
A founder runs a bakery with no separate legal entity. She personally owns all the assets and is fully responsible for the debts. The business form is best described as a:
The business is a sole proprietorship. With no separate legal entity, the owner personally holds the assets and bears unlimited liability for all business debts. Limited liability companies and corporations are distinct legal entities that protect owners from the firm's obligations.
- Asole proprietorshipCorrect
- Blimited liability company
- Cpublicly traded corporation
Explanation
A sole proprietorship has no legal existence separate from its owner, so the owner holds the assets and has unlimited personal liability for the debts. A limited liability company and a corporation are separate legal entities that shield owners from business debts.
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