Limited And Unlimited Liability Flashcards
What is an incorporated buissness?
The owner is the buissness- no legal difference
Owner has unlimited liability for buissness actions
Most unincorporated business are sole traders
What is a unincorporated buissness
Legal difference between businesses
Owners have limited liability
Most operate as private limited companies
What is Unlimited Liability?
A characteristic of unincorporated businesses.
Who is responsible for the debts and liabilities of an unincorporated business?
Business owner/s are personally responsible for the debts and liabilities of the business.
What happens if an unincorporated business fails?
If the unincorporated business fails, the owners are liable for the amounts owed.
How does Unlimited Liability affect the risk of operating a business?
Unlimited liability adds to the risk of operating as a sole trader or partnership.
What is the importance of limited liability?
It provides important protection for shareholders in a company.
What can shareholders lose in a company with limited liability?
Shareholders can only lose the value of their investment.
Are shareholders liable for the debts of the company in a limited liability structure?
No, they are not liable for the debts of the company.
