explain the liability of sole trader
Answers
Answer:
A sole trader is responsible for the liabilities of the business. Liability is unlimited and includes all personal assets, including any assets jointly-owned with another person, such as a house. You are also not covered by workers' compensation should you injure yourself at work.
Explanation:
Answer:
A sole trader is the simplest form of business structure and is relatively easy and inexpensive to set up. As a sole trader you will be legally responsible for all aspects of the business. You’ll generally make all the decisions about starting and running your business and you can employ people.
Advantages of being a sole trader
Simple to set up and operate.
You retain complete control of your assets and business decisions.
Fewer reporting requirements.
Any losses incurred by your business activities may be offset against other income, such as your investment income or wages (subject to certain conditions).
Allows you to use your individual tax file number (TFN) to lodge tax returns.
You are not considered an employee of your own business and therefore don’t pay payroll tax, superannuation or workers’ compensation on income you draw from the business.
Relatively easy to change business structure if your business grows or if you wish to wind things up.
Disadvantages of being a sole trader
Unlimited liability which means all your personal assets are at risk if things go wrong.
Little opportunity for tax planning – you can’t split business profits or losses with family members and you are personally liable to pay tax on all the income from the business.