2.1.3 liability Flashcards
what is limited liability
legal protection where the owner and shareholders within the business are not personally responsible for the business debts and may only have to repay the sum of money they invested
what is unlimited liability
the owner of the business is personally responsible for business debts and personal belongings (e.g cars) may be seized in order to repay these debts
what are some implications of unlimited liability
unable to sell shares, risky, owners are less likely to make business risks as their is more at stake if something goes wrong
what are some implications of limited liability
able to sell shares, personal assetts are not at risk, owenr and business have separate legal identities
what finance is suitable for a business with unlimited liability
trade credit, venture capital, loans, overdraft, personal savings
what finance is suitable for a business with limited liability
personal savings, share capital, retained profit, loans, sale of assetts
the owner of the business is personally responsible for business debts and personal belongings (e.g cars) may be seized in order to repay these debts
unlimited liability
legal protection where the owner and shareholders within the business are not personally responsible for the business debts and may only have to repay the sum of money they invested
limited liability
what liability do soletraders have
unlimited
what liability do ltds have
limited
why is having unlimited liability risky
because you risk losing personal assetts
why are unlimited liability businesses unlikely to grow
because it is very risky, meaning the business owners are less likely to take risks to grow the business as the downside would be losing personal assetts or the business failing
