Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

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Prepare for the CAPS Exam with a comprehensive study of Module 2. Utilize our practice resources filled with flashcards, multiple choice questions, and thorough explanations to ensure your success!

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What characterizes a sole proprietorship?

Complex structure with limited liability
Ownership is shared among partners
Not a legal entity, owner retains all profits
Requires extensive paperwork to establish

The correct answer is: Not a legal entity, owner retains all profits

A sole proprietorship is characterized by being a business owned and operated by a single individual. In this structure, the owner retains all profits generated by the business, as well as bearing all liabilities. Unlike corporations or partnerships, a sole proprietorship does not require a formal legal entity, meaning it is not separately recognized from the owner. This leads to the owner being fully responsible for any debts or obligations incurred by the business. The simplicity of a sole proprietorship is a significant factor in its popularity among small business owners. It typically involves minimal paperwork to start, often just requiring a business license or permit, which distinguishes it from more complex business structures. The advantages of a sole proprietorship include direct control of the business and the unrestricted entitlement to profits, making it an attractive option for entrepreneurs.