2.1.3 Liability - Unlimited Liability + Finances appropriate

Question 1

Unlimited liability

Answer 1

A legal status which means that business owners are liable for all business debts.

They’re personally responsible for the debts of the business no matter the value
- e.g may have to sell assets like house to make up for debt

Question 2

What type of businesses are unlimited liability businesses?

Answer 2

Unincorporated businesses

e.g so sole traders & Partnerships

Question 3

Unincorporated business

Answer 3

A business model in which there is no legal difference between the owners and the business

Question 4

Implications of unlimited liability

Answer 4

Likely to have fewer sources and methods of finance because investors may view investing in ur business as risky

Question 5

Disadvantages of unlimited liability. 1) assets 2) unlawful acts 3) sued 4) loan

Answer 5

1) Owners may have to sell their own assets or use personal savings to pay the debts of a business - can be very difficult for them and can impact their out of work life

2)personally liable for unlawful acts committed by the owners or employees

3) Owners may also liable if sued by the business

All of this occurs because your business there is no separate legal identities between the business and owners

4) Maybe difficult to get a loan due to increased risk

Question 6

Finances appropriate for unlimited Liability businesses -8

• Read blue book.

8th one beginning with G

Answer 6

• Personal saving
• Retained profit
• Mortgage
• Unsecured bank loans (where a businesses assets are used as security)
• Peer2peer lending
• Crowd funding
• Bank overdraft - the limit will vary considerably tho as it is risky for the bank to give a large amount of overdraft
• Grants