2.1.3 Liability Flashcards
1
Q
What is limited liability?
1
A
- Owners not liable for debts of business
2
Q
What is unlimited liability?
1
A
- Owners liable for debts incurred by business
3
Q
Which forms of business have unlimited liability?
2
A
- Sole trader
- Partnership
4
Q
Which forms of business have limited liability?
2
A
- Private limited company (Ltd)
- Public limited company (Plc)
5
Q
What are the implications of a business with unlimited liability?
2
A
- Limits growth (non risky)
- Lose all personal assets through administration (creditors) - bankrupt
6
Q
What are the pros of a business with limited liability?
2
A
- Legal protection = risk taking, ^growth
- Doesn’t threaten well-being of owners family
7
Q
What is liquidation?
1
A
- Company’s owners close company, selling off assets to get cash to pay off debt owed
