2.1.3 Flashcards
What is liability
The legal responsibility to pay money owed by a business.
What is unlimited liability
A legal status which means that business owners are liable for all business debts.
What is limited liability
A legal status that means shareholders can only lose the original amount they invested in a business.
What does the term Unincorporated business mean
A business model in which there is no legal difference between the owners and the business.
What does the term Incorporated Business mean
A business model in which the business and the owners have separate legal identities.
What does the term Bankrupt mean
When an individual is unable to meet personal liabilities, some or all of which can be as a consequence of business activities.
What is Liquidation
When a company’s owners close down the company, selling off its assets to generate cash to pay off the debts of the business.
What does the term Rights issue mean
Issuing new shares to existing shareholders at a discount.
What are the benefits to limited liability
- Personal protection from business debts
- Less stressful
