Liability

Question 1

What is a business?

Answer 1

A business is any occupation which engages in economic activities that include the production and sale of goods and services .

Question 2

What is “the capital of a business” referring to?

Answer 2

The money a business has available or a person’s financial assets that they have available in the business.

Question 3

What are assets?

Answer 3

Assets are a resource owned by a business.

Question 4

What is liability?

Answer 4

Liability is the legal debts that a company owes to third parties.

Question 5

What is limited liability?

Answer 5

Limited liability is a form of legal protection that prevents shareholders and owners from being held personally responsible for their company’s financial losses.

Question 6

What is unlimited liability?

Answer 6

the full legal responsibility that business owners and partners assume for all business debts.

Question 7

Advantages of limited liability in a business?

Answer 7

1) Owners are not personally responsible for the losses and debts of the company - limited liability.
2)The company is a separate legal entity.
3)No restriction on the number of owners.

Question 8

Advantages of having unlimited liability in a business?

Answer 8

1) Owners have complete control over the business.
2) They are free to make all business decisions within the law. 3) Establishing and organizing sole proprietorship and general partnership firm is easy.

Question 9

Define collateral

Answer 9

assets that are provided as security to ensure satisfaction of a future liability.