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 Form 2 Business Studies: Forms of business units lessons

circumstances which may lead to the dissolution of a sole proprietorship

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Answer Text:
Dissolution of a sole proprietorship.
- Dissolution refers to the termination of the legal life of a business.
- The following circumstances may lead to the dissolution of a sole proprietorship:
(i) Death or insanity of the owner.
(ii) Transfer of the business to another person. This transfers the rights and obligations of the business to the new owner.
(iii) Bankruptcy of the owner. This means that the owner lacks the financial capability to run the business.
(iv) The owner voluntarily decides to dissolve the business e.g. due to continued loss making.
(v) Passing of a law which renders the activities of the business illegal.
(vi) The expiry of the period during which the business was meant to operate.


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