Understanding Sole Trader

What does it mean to be insolvent?

• To be financially secure.

• To have a surplus of assets.

• To be unable to pay debts when they are due.

• To have a high credit score.

What is the process of liquidating a business?

• Continuing operations while increasing inventory and hiring more staff.

• Filing for bankruptcy and closing the business without selling assets.

• Transferring ownership to a family member without any legal process.

• Includes selling assets, paying debts, and dissolving the business legally.

Define limited liability in the context of business.

• Allows business owners to take personal loans for business expenses.

• Requires owners to pay all company debts personally.

• Means that owners can lose their entire investment in the business.

• Means that business owners are not personally responsible for the company's debts beyond their investment in the business.

What is unlimited liability and who does it apply to?

• Only affects non-profit organizations.

• Applies to corporations and LLCs.

• A feature of limited partnerships.

• Applies to sole proprietorships and general partnerships.

What is a sole trader?

• A government-owned business entity.

• An individual who owns and operates a business independently.

• A partnership of multiple individuals.

• A type of corporation with shareholders.

List one characteristic of a sole trader.

• Corporate tax benefits

• Partnership structure

• Unlimited liability

• Limited liability

What are the risks associated with being a sole trader?

• Personal liability for debts, limited access to funding, and potential difficulty in managing all business aspects alone.

• Complete control over all business decisions without any challenges

• Guaranteed profit from the start

• Unlimited access to government grants

How does a sole trader acquire capital for their business?

• Selling company shares

• Crowdfunding campaigns exclusively

• Personal savings, loans, investments from family and friends, or reinvesting profits.

• Government grants only

What is one advantage of having personal contact with clients as a sole trader?

• Stronger client relationships and trust.

• Less flexibility in scheduling meetings.

• Higher costs for client services.

• Limited communication channels with clients.