ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which feature is characteristic of a sole trader business?
A sole trader's owner has unlimited liability because the business is not legally separate from the individual. Business debts can therefore be recovered from the owner's personal assets. Legal separateness, share issues and corporate taxation are features of companies instead.
- AThe owner has unlimited liability for the debts of the businessCorrect
- BThe business is legally separate from its owner
- CShares are issued to raise capital from the public
- DProfits are taxed as corporate profits before distribution
Explanation
A sole trader has no separate legal personality, so the owner is personally liable for all business debts without limit. Legal separation, share issues and corporate taxation apply to companies, not sole traders.
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