Which of the following is a disadvantage of being a sole trader?

A sole trader is an individual who runs their own business and is personally responsible for its debts. One key disadvantage of this business structure is that the business is closely tied to the owner’s personal circumstances. If the owner dies or becomes incapacitated, the business does not automatically continue; it effectively ends. This can be particularly challenging for clients, employees, and any ongoing contracts, as there may not be a clear succession plan in place.

The other options highlight aspects that are more favorable or neutral. For instance, the ability of the business to thrive without the owner's direct involvement can indicate a healthy delegation or a possibility of scaling, which is not a disadvantage. Similarly, limited liability typically refers to corporate structures rather than sole traders, who carry unlimited liability, making this point more about potential misconceptions. Lastly, the ease of transferring ownership is generally a benefit associated with corporations and partnerships rather than sole trader operations, where the transfer can be complicated due to the personal nature of the business.