2.1.3 Liability

Question 1

What is unlimited liability?

Answer 1

Owners are fully responsible for all debts of the business

This means that personal assets are at risk if the business incurs debts.

Question 2

What is the legal distinction between owners and businesses under unlimited liability?

Answer 2

No legal distinction between owners and business so personal assets are at risk

Owners are personally liable for the debts and obligations of the business.

Question 3

Are owners legally responsible for unlawful acts committed by the business under unlimited liability?

Answer 3

Yes

Owners can be held accountable for any illegal actions taken by the business.

Question 4

What are some sources of appropriate finance for a business?

Answer 4

• Debentures
• Retained profit
• Share capital
• Venture capitalists
• Business angels

These sources can provide the necessary funds for business operations and growth.

Question 5

What does limited liability mean?

Answer 5

Owners can only lose the original amount they invested

This protects personal assets from being used to pay business debts.

Question 6

How are companies regarded in terms of legal entity under limited liability?

Answer 6

Companies are considered separate legal entities to the business

This means the company itself is responsible for its debts.

Question 7

What happens to owners if the company fails under limited liability?

Answer 7

Owners would lose their investment

Personal assets are not at risk in this case.

Question 8

What are some additional sources of appropriate finance for a business?

Answer 8

• Personal savings
• Retained profit
• Unsecured loan
• Overdraft
• Mortgage
• Grants
• Crowdfunding
• Peer-to-peer lending
• Leasing
• Trade credit

These options provide various ways to fund business activities.