2.1.2 Liability Flashcards
1
Q
What is unlimited liability ?
A
- Owners are fully responsible for all debts that must be paid
1
Q
What are the implications of unlimited liability
A
- No legal distinguishment between owner and business
- As a result owners may need to sell personal assets in order to pay debts/legal fees
2
Q
What is meant by limited liability
A
- Shareholders and owners are not responsible for debts of the business
- To resolve debts they must sell assets of the business however not personal assets
3
Q
What are methods of finance which are suitable for limited liability business’s
A
- Retained profits
- Share capital
- Venture capitalists and business angels
4
Q
What methods of finance are suitable for unlimited liability business’s?
A
- Personal savings
- Overdraft
- Trade credit
- Crowd funding
5
Q
A