Which statement best defines a sole trader?

Which statement best defines a sole trader?

• A. An individual owner who provides permanent finance, has full control and keeps all profits, with unlimited liability.
• B. A business owned by two or more people who agree on responsibilities and profits.
• C. A business with a separate legal identity and limited liability.
• D. A nonprofit organization with no owners.

Answer: (A)

A sole trader is a business owned and run by a single person. This description fits because the owner provides the finance for the business, has full control over decisions, and keeps all the profits since there are no partners to share them with. The liability is unlimited, meaning the owner could be personally responsible for the business’s debts. This contrasts with other business forms: a business with two or more owners describes a partnership; a business with a separate legal identity and limited liability describes a company; and a nonprofit organization has no owners.

A sole trader is a business owned and run by a single person. This description fits because the owner provides the finance for the business, has full control over decisions, and keeps all the profits since there are no partners to share them with. The liability is unlimited, meaning the owner could be personally responsible for the business’s debts.

This contrasts with other business forms: a business with two or more owners describes a partnership; a business with a separate legal identity and limited liability describes a company; and a nonprofit organization has no owners.