2.1.3 Liability

Question 1

What is limited liability?

Answer 1

If a business gets into debt the owner will only lose their investments into the business

Question 2

What is unlimited liability?

Answer 2

If a business gets into debt the owner will lose all investments and assets

Question 3

What are the pros of limited liability?

Answer 3

-Attracts investors by reducing the risk of start-up
-Pay a cooperation tax of 20%

Question 4

What are the cons of limited liability?

Answer 4

-Increased legal obligations

Question 5

What are the pros of unlimited liability?

Answer 5

-Dont have legal requirements for shares

Question 6

What are the cons of unlimited liability?

Answer 6

-Income tax is calculated based on earnings
-Harder to get a loan

Question 7

Which finance is appropriate for limited liability?

Answer 7

Generally external, some nternal finance

Question 8

Which finance is appropriate for unlimited liability?

Answer 8

Generally internal savings