Which is an advantage of a sole trader?

• A. Complex regulatory compliance
• B. Simple to set up
• C. Shared profits with partners
• D. Limited liability

Answer: (B)

The main idea is that forms of business ownership differ in how hard they are to start. A sole trader is the simplest option because it requires minimal formal setup, with few legal steps, paperwork, or costs. You typically just start trading as yourself and register with the tax authorities as a business, which lets you begin quickly and with relatively low ongoing administration. This immediacy and low cost is why it’s considered an advantage for many small or new ventures.

In contrast, the idea of complex regulatory compliance is something that would make starting up harder, not easier. Sharing profits with partners reflects a feature of partnerships, not sole traders, since profits are not shared with partners in a sole-trader setup. Limited liability is not true here either, because a sole trader has unlimited liability, meaning personal assets could be at risk for business debts.