2.1.2 Liability Flashcards

1
Q

What is unlimited liability ?

A
  • Owners are fully responsible for all debts that must be paid
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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
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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
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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
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4
Q

What methods of finance are suitable for unlimited liability business’s?

A
  • Personal savings
  • Overdraft
  • Trade credit
  • Crowd funding
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5
Q
A
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