PRC-3 · Chapter 2 · Question 24 of 61
Mr. Ali runs a freelance graphic design business as a sole trader. If a client sues him for breach of contract and wins a massive settlement, what is the worst-case financial scenario for Mr. Ali?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) His personal assets, such as his car and home, may be seized to pay the debt
Explanation
A sole trader has unlimited liability, meaning there is no legal distinction between personal and business finances; personal assets are at risk.
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