2.1.3 Liability

Question 1

Limited liability

Answer 1

An investors liability/financial commitment is limited to the total amount invested or promised in share capital. An investors belongings beyond this venture are protected.

• Private limited company.
• Public limited company.

Question 2

Unlimited liability

Answer 2

The owners of a business are responsible for the total amount of debt of the business. The owner may loose their personal belongings if the value of these is needed to cover the debts of the business.

• Sole trader.
• Partnership.

Question 3

Sources of finance appropriate for limited liability businesses

Answer 3

• Loan.
• Overdraft.
• Venture capital.
• Grants.
• Trade credit
• Retained profit.
• Sale of assets.
• Leasing.
• Share capital.

Question 4

Sources of finance appropriate for unlimited liability businesses

Answer 4

• Loans.
• Overdrafts.
• Crowd funding.
• Peer-to-peer funding.
• Owners capital.
• Trade credit.
• Business angels.
• Leasing.