2.1.3 Liability

Question 1

unlimited liability

Answer 1

finances of the business are treated as inoperable from the finances of the owner

Question 2

what types of businesses have unlimited liability

Answer 2

sole traders and partnerships

Question 3

advantages of unlimited liability

Answer 3

easy and inexpensive

direct control over business decisions

all profits go directly to proprietor

Question 4

disadvantages of unlimited liability

Answer 4

personal assets can be taken to cover debts

all risk of the business is given to owner

owner responsible for all of payment debts

Question 5

what types of businesses have limited liability

Answer 5

private and public limited companies

Question 6

advantages of limited liability

Answer 6

can achieve economies of scale

can often dominate a market due to size

easier to raise finance

Question 7

disadvantages of limited liability

Answer 7

high start up costs

divorce of ownership and control

all company accounts can be inspected by the public