2.1.3 Liability

Question 1

limited liability defintion

Answer 1

Limited liability means that the owners of a business are only responsible for its debts up to the amount they invested, protecting their personal assets from being used to cover the business’s liabilities.
–> original investment at risk

PLC + LTD

Question 2

incorporated

Answer 2

legal registration of becoming PLC or ltd –> seperate legal identity

Question 3

definition unlimited liability

Answer 3

Unlimited liability means that the owners of a business are personally responsible for all its debts, with no limit, risking their personal assets if the business cannot repay its obligations.

sole trader + partnership

Question 4

implications of unlimited liability

Answer 4

take less risk (debt
less borrowing
personal assets at stake
chose conservative rate

Question 5

implications of limited liability

Answer 5

seperate legal identity
can sue and be sued
owver and business can own seperate assets
owner can sell shares to shareholders
protection of owners personla assets savings in event of collaps/debt

Question 6

finance suitable for unlimited liability businesses (favorable but not limited to)

Answer 6

loans. private investors e.g. business angels, credit card from bank, trade cvredit, crowdfunding, owners savings, overdraft –> short term, smaller values (protect ownre)

Question 7

finance suitable for limited liability businesses (favorable but not limited to)

Answer 7

retained proft, sale of assets, share issuse, grants, VC
–> larger amount, strategic thought of long-term