Sole proprietorships, partnerships, corporations, and why entrepreneurs take risks

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Card A. Compare chart "U.S. business applications and unemployment" (U.S. Census Bureau Business Formation Statistics and U.S. Bureau of Labor Statistics, through FRED, retrieved Nov 14, 2026), columns Year | Business applications (millions) | Unemployment rate (%): 2019 | 3.52 | 3.7; 2020 | 4.38 | 8.1; 2021 | 5.41 | 5.4; 2022 | 5.08 | 3.7; 2023 | 5.49 | 3.6; 2024 | 5.25 | 4.0. Note: an application is a request for an employer number. It does not mean a firm opened or hired anyone. Applications are monthly seasonally adjusted counts added up for each year; unemployment is the annual average.

2. 1.

   A writer claims people start businesses mostly because they lost jobs. Ren tests it with both columns on card A. What is the verdict?

   • Shown: unemployment rose to 8.1 percent in 2020 and applications jumped, so job loss drove them
   • Weakly supported: applications rose in 2020 with unemployment but stayed high as it fell
   • Unsupported: card A gives rates for unemployment and counts for applications
   • Refuted: unemployment fell after 2020 while applications stayed high
3. 2.

   Zee compares the 2022 row with the 2019 row on card A. Which statement about applications and unemployment is best supported?

   • In 2022 unemployment was 3.7 percent, as in 2019, yet applications were 5.08 million, not 3.52
   • Applications track unemployment closely, rising in each year that it rises and falling when it falls
   • Applications fell between 2020 and 2022, because unemployment fell by more than half
   • Unemployment was 3.7 percent in both years, so applications must have been equal

4. Use this

   Cards A and B on a cafe. Card A. Compare chart "A cafe's year, with the owner's other options" (made up for practice), columns Line | Amount: Money from customers | $180,000; Rent, supplies and wages paid | $120,000; Salary at the job the owner turned down | $56,000; Owner's $100,000 of savings in the cafe, if left in a 4% account | $4,000 a year. Note: invented cafe, made up for practice. The owner works full time in the cafe and takes no wages. Card B, "A second cafe" (made up). A second cafe would bring in $90,000 a year and cost $75,000 a year to run, including a manager's wages. It needs $50,000 of the owner's savings, which could instead earn 4% a year. The owner's own time would not change.

6. 3.

   Ari reads card A. Is the owner better off than in the job turned down, counting savings too?

   • Better off by $4,000, since the cafe also keeps the owner's savings at work
   • About equal: the $60,000 above costs paid matches the $56,000 salary plus $4,000 of interest given up
   • Better off by $60,000, since that is what the cafe leaves above the costs it paid out during the year
   • Worse off by $56,000, since the owner gave up that salary
7. 4.

   Bo reads cards A and B. Should the owner open the second cafe, counting the savings it ties up?

   Use the picture in question 3.

   • Yes: it adds $15,000 above costs paid, or $13,000 after $2,000 of interest given up
   • No, because $75,000 of costs is a large sum and $50,000 of savings is at risk
   • No, because the first cafe's economic profit is $0 and a second one will be $0 too
   • Yes, because it brings in $90,000 of sales a year
8. 5.

   A writer says zero economic profit means the owner should shut the cafe. Esme tests it with card A. What is the verdict?

   Use the picture in question 3.

   • Not supported: zero economic profit means the cafe pays as well as the $56,000 job and the $4,000 of interest
   • Supported: the cafe pays no more than the $60,000 of other options, so it is a waste of the owner's time and savings
   • Not supported: the cafe's accounting profit is $60,000, so it is a success
   • Supported: zero profit means the cafe earns $0, so shutting it loses nothing
9. 6.

   Jun wants to be sure the second cafe will add $13,000. Which missing evidence would matter most?

   Use the picture in question 3.

   • Whether savings accounts pay 4% at each bank
   • What the first cafe earned in its first year, as a guide to what a second cafe can earn
   • Whether the second cafe will really bring in the sales the owner forecasts
   • Whether the owner works full time in the first cafe

10. Use this

    Card A, "A business that fails" (made up). The business owes $400,000. Selling everything it owns raises $150,000, which leaves $250,000 unpaid. Card B, "Liability rules" (general rules in our words; details vary by state). A sole proprietor is personally responsible for the unpaid debts. In a general partnership, each partner can be pursued for the whole amount, and partners then settle among themselves. In a corporation, shareholders generally lose only the money they paid for shares. A person who signs a personal guarantee on a loan owes that loan personally. Card C, "The owners" (made up). Case 1: Ana owns the business alone. Case 2: Ben and Cho are partners, 80% and 20%. Case 3: Dee and Eli are shareholders, each paid $20,000 for shares, and Eli also signed a personal guarantee on a $100,000 bank loan.

11. 7.

    Kira applies card B to Case 1. Who can be asked to cover the $250,000 that is unpaid, and with what?

    • Ana alone, from personal property such as savings, because a sole proprietor is personally responsible
    • Ana up to $150,000, the value of what the business owned
    • The bank that lent the money, because the business is a separate person
    • No one beyond the $150,000 the sale raised, because the business itself has no more property that can be sold
12. 8.

    Luz applies card B to Case 2, where Ben holds 80% and Cho 20%. Cho's creditors ask for money. What follows?

    • Only Ben, the majority partner, can be pursued, since he holds 80%
    • Cho owes just 20% of the $250,000, which is $50,000, matching Cho's share of the partnership
    • Neither partner owes anything personally, since the partnership is the debtor
    • Either partner can be pursued for the whole $250,000, so Cho could be asked for all of it
13. 9.

    Dee and Eli own shares in Case 3. Dee says corporations protect shareholders from business debts. Milo looks for the strongest objection to the claim as stated. Which is it?

    • Shareholders must repay the business's debts out of their own money, so Dee's claim is plain false from the start
    • Dee and Eli each paid $20,000 for shares, so each could lose more than $20,000
    • Eli signed a $100,000 personal guarantee, so Eli can owe that loan personally even in a corporation
    • Dee and Eli together own the company, so Dee also owes the guarantee
14. 10.

    A banker says Case 3 shows a corporation's owners can never be pursued for business debts. Noah tests the claim with cards B and C. What is the verdict?

    • Not supported: both owners can be pursued for the $250,000 shortfall
    • Supported: Dee and Eli owe nothing, because the shares are worth $20,000
    • Supported: both owners lose at most $20,000, so no one is pursued personally for any of the business's debts
    • Not supported: Eli's $100,000 guarantee is a personal debt, though both otherwise lose at most $20,000