Sole Trader Transition to Partnership

Steps:

• Identify common motivations: sole traders often seek partnerships for shared resources, expertise, or risk reduction.
• Evaluate options: assume 1 involves capital sharing, 2 expertise addition, 3 legal liability limits (based on standard business structures).
• Match to choices: D selects only 3, aligning with primary driver of liability protection.
• Confirm: textbooks emphasize liability as key for sole traders facing unlimited risk.

Why D is correct:

• Sole traders have unlimited liability; partnerships (general) share it, reducing personal risk per Partnership Act definitions.

Why the others are wrong:

• A and B: Include 1 or 2, but capital/expertise aren't sole reasons—liability drives formation.
• C: 2 only ignores liability focus.

Not enough information on exact 1, 2, 3 wording.

Final answer: D