Which statement about ownership transfer in a sole proprietorship is true?

Which statement about ownership transfer in a sole proprietorship is true?

• A. Ownership is not freely transferable.
• B. Ownership can be freely transferred.
• C. Ownership transfers require board approval.
• D. Ownership is transferred via stock issuance.

Answer: (B)

In a sole proprietorship, the owner and the business are the same legal entity, so transferring ownership is essentially a sale of the business to another person. There’s no separate board or corporate machinery to approve a transfer, and there’s no stock to issue, because it isn’t a corporation. The new owner simply takes over the assets and operations (and any agreed-upon liabilities), often requiring reissuing licenses or updating contracts as needed. That makes ownership transfer possible and straightforward, which is why the statement that ownership can be freely transferred is the best answer.

In a sole proprietorship, the owner and the business are the same legal entity, so transferring ownership is essentially a sale of the business to another person. There’s no separate board or corporate machinery to approve a transfer, and there’s no stock to issue, because it isn’t a corporation. The new owner simply takes over the assets and operations (and any agreed-upon liabilities), often requiring reissuing licenses or updating contracts as needed. That makes ownership transfer possible and straightforward, which is why the statement that ownership can be freely transferred is the best answer.