What is the disadvantage of being a sole trader?

• A. Limited liability for personal assets
• B. There is no legal distinction between business and personal assets
• C. Easy to raise capital
• D. The business can automatically operate overseas

Answer: (B)

Sole traders face unlimited liability because there is no legal separation between the business and the owner. This means personal assets—like your house or savings—can be used to cover business debts or legal claims. That risk is the main disadvantage of this structure, making the business financially riskier for the owner.

The idea of limited liability would apply to a different setup where the business is a separate legal entity, which is not the case for a sole trader. Easy access to capital is typically harder for sole traders, not easier, since lenders often prefer structures with clearer separation of assets. And operating overseas isn't automatic for a sole trader; it requires compliance with laws and regulations and is not a built-in advantage.