A sole trade business is started by:a)5 personsb)2 personsc)3 personsd)1 personCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

The correct answer is D) 1 person
Explanation:

A sole trader business is started by one person who owns, manages, and is personally responsible for all aspects of the business. This business structure offers simplicity and flexibility, but also carries the risk of unlimited personal liability for the owner.

Answer

A sole proprietorship , also known as a sole tradership, individual entrepreneurship or proprietorship, is a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity.

Answer

Sole trade business is a model of business where a business is totally owned by a single proprietor unlike a partnership firm.

Answer

A sole trade business is started by one person. This means that the business is owned and operated by a single individual, who is responsible for all aspects of the business. Let's delve into the details to understand why option 'D' is the correct answer.

1. Definition of a Sole Trader:
A sole trader, also known as a sole proprietorship, is a type of business entity where an individual operates and manages the business on their own. The person assumes all the risks and liabilities associated with the business and retains all the profits as well.

2. Formation of a Sole Trader Business:
To start a sole trader business, an individual can simply begin trading under their own name or choose a business name. There are no legal formalities or registration requirements for a sole trader business, making it the easiest and most straightforward form of business organization.

3. Ownership and Control:
As the sole proprietor, the individual owns the business and has complete control over decision-making and operations. They have the authority to make all business-related choices, from setting prices and choosing suppliers to hiring employees and determining business strategies.

4. Liability and Risk:
One of the key characteristics of a sole trader business is unlimited liability. This means that the owner is personally responsible for all debts and obligations of the business. In the event of financial difficulties, the owner's personal assets can be used to settle any outstanding liabilities.

5. Taxation and Profit:
A sole trader is taxed on their business profits as part of their personal income. The business income and expenses are reported on the individual's personal tax return. This makes the taxation process relatively simple compared to other forms of business.

6. Advantages of a Sole Trader Business:
- Easy and inexpensive to set up and dissolve.
- Direct control and decision-making authority.
- Retention of all profits.
- Flexibility in operations and management.

7. Disadvantages of a Sole Trader Business:
- Unlimited liability.
- Limited access to capital.
- Sole responsibility for the business's success or failure.
- Difficulty in expanding and growing the business.

In conclusion, a sole trade business is started by one person as the sole proprietor. This individual owns, operates, and assumes all the risks and rewards associated with the business.

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