Colorado Nursing Home Administrators (NHA) Practice Exam

When is it considered a change of ownership for a sole proprietorship?

1. Formation of a corporation

2. Dissolution of proprietorship

3. Transfer of 50% ownership to another individual

4. Transfer of business location

The correct answer is: Formation of a corporation

A sole proprietorship is a type of business entity where a single person owns and operates the business. The owner is personally liable for all debts and obligations of the business. A change of ownership for a sole proprietorship is typically considered when the business transforms into a different legal structure, such as a corporation. This is because a corporation is a separate legal entity, distinct from its owners, and therefore a change in ownership would occur when the sole proprietor becomes a shareholder in the newly formed corporation. The other options listed are not considered a change of ownership for a sole proprietorship. B The dissolution of a proprietorship would mean the business is dissolved and no longer exists. C: A transfer of 50% ownership to another individual would result in a partnership, not a change of ownership for a sole proprietorship. D: A transfer of business location would not change the ownership structure of the business, but rather just the physical location. Therefore, A is the only option that accurately describes a change of ownership for a sole proprietorship.