Question

State Whether the Following Statement Are True Or False (Give Reason)

The liability of a sole trader is unlimited.

Options

• True

• False

Answer 1

This statement is True.

1. In Sole trading concern all activities are owned, managed and controlled by a single man.
2. He needs not to share his profit or risk to anybody. Thus he can enjoy the entire profit earned by him.
3. In a similar way, if he suffers a loss he is alone to bear it. If business liability exceeds the business asset, then his private property is used to settle his business debts.
4. That is why the liability of a sole trader is unlimited.