Q.In a Sole Trading Concern, the liability of the owner for business debts is:
(A) Limited to the amount of capital invested in the business
(B) Unlimited, extending to the owner's personal assets
(C) Shared equally with employees
(D) Limited to the value of business assets only

A Sole Trading Concern has no separate legal identity from its owner, so the law does not stop a business creditor at the boundary of the business's own assets.

Work through each option against the rule stated above; because the business and owner are legally the same person, the owner's personal, non-business property can be used to satisfy business debts once business assets are exhausted.

A Sole Trading Concern has no separate legal entity apart from its owner — the law treats the business and the proprietor as one and the same person.

Option-by-option analysis:

• (A) Incorrect — liability being capped at the invested capital is a feature of limited-liability forms (companies), not a sole proprietorship.
• (B) Correct — because there is no separate legal entity, the owner's personal assets are exposed once business assets run short.
• (C) Incorrect — employees are not owners and bear no liability for the business's debts at all.
• (D) Incorrect — this describes limited liability, the opposite of a sole proprietor's actual position.