2.1.3 Liability

Question 1

what is unlimited liability

Answer 1

when the owners of a business’s personal assets are at risk

Question 2

what is limited liability

Answer 2

when the owner’s personal assets are not at risk due to the business having a separate individual legal identity

Question 3

why is it easier for a business with limited liability to access finance

Answer 3

• businesses with limited liability ( ltd and PLC’s) can sell shares
• the people who invest in the business are also not liable for any debts the business gets into, they will only lose their original investments

Question 4

unlimited liability countries rely on more sources of finance including…

Answer 4

• family and friends, peer-to-peer funding, crowdfunding
• unlimited liability companies can still sell shares in the business to angel investors who then become partners
  However, this makes the angel investor liable so the business may find it hard to find someone willing to take this risk