limited liability

Question 1

what is a limited liability?

Answer 1

 Business only liable for their original investment
should the business fall into debt
- Protection for their personal assets/finances
 Business and owner can own separate assets
 Business can sell shares to shareholders
- Ltd; to friends/family only
- Plc; to general public
 Encourages more risk taking with finance
 Sources of finance: share capital, retained profit,
venture capital, business angels, bank loan

Question 2

what is unlimited liability?

Answer 2

 If a business has debts, the owner must pay even
if this means selling their own possessions to find
the money
 Relates to sole trader and partnership
 They are unable to sell shares in the business
 Collateral is needed to secure finance e.g. security
a loan against a house
 Sources of finance: Personal savings, retained
profit, mortgages, bank loan, peer to peer
lending, crowd funding, grants, overdrafts