Understanding Sole Traders in Business

What is a sole trader?

• A business owned by two or more people

• A business owned and run by one person

• A large corporation

• A government agency

Which of the following is a key advantage of being a sole trader?

• Limited liability

• Easy to set up and manage

• Access to large amounts of capital

• Shared decision-making

What is one of the main disadvantages of being a sole trader?

• Unlimited liability

• Complex tax requirements

• Difficult to make decisions

• High start-up costs

In the context of sole traders, what does "unlimited liability" mean?

• The business can borrow unlimited money

• The owner is personally responsible for all business debts

• The business can operate in unlimited locations

• The owner has unlimited decision-making power

Which of the following is a common source of finance for sole traders?

• Issuing shares

• Bank loans

• Government grants

• Venture capital

How are profits taxed for a sole trader?

• As corporate tax

• As personal income tax

• As capital gains tax

• As sales tax

Which of the following is a typical characteristic of a sole trader business?

• It has a board of directors

• It is a separate legal entity from the owner

• It is easy to transfer ownership

• The owner has full control over the business

What is one reason a person might choose to become a sole trader?

• To share profits with partners

• To have complete control over business decisions

• To have limited liability

• To access large-scale funding

Which of the following is a responsibility of a sole trader?

• Filing annual reports with the government

• Sharing profits with shareholders

• Keeping accurate financial records

• Holding annual general meetings

What happens to a sole trader business if the owner decides to retire?

• The business automatically becomes a partnership

• The business continues under new management

• The business ceases to exist unless transferred or sold

• The business is taken over by the government