Liability And Finance

Question 1

What is unlimited liability and what does it mean for the owner?

Answer 1

Unlimited liability means that the business and the owner are treated as one.

• people owned money (creditors) can get court to make the owner pay by ( selling cars, houses)
• can be made personally bankrupt
• sole traders and pertenerships

Question 2

What is limited liability?

Answer 2

Limited liability is where the business is separate to the owner

• debt incurred are within the business it self
• court can force the business to sell all its assets ( computers,cars)
• if there is still not enough money the company is shut down

Question 3

What are the advantages of having limited liability?

Answer 3

• gives owners the confidence to take more risks

- expansion can be financed by bank loans without threatening the well being of the owner

Question 4

What are the disadvantages of limited liability?

Answer 4

• gives huge scope for fraud
• takes customers money enjoy the lifestyle the put the company into liquidation before customers receive the service they paid for

Question 5

What does a unlimited company not have access to?

Answer 5

Share capital equity

Question 6

How do unlimited liability businesses get their finance?

Answer 6

• owners capital
• bank finance
• leasing
• trade credit

Question 7

Both private and public limited companies have access to the following forms of finance:

Answer 7

1. Share capital
2. Leasing and trade credit
3. Crowdfunding
4. Angel it venture capital investment ( higher interest rate)
5. Bank finance