Topic 15 : Limited and unlimited liability

Question 1

Meaning of limited liability?

Answer 1

Losses are limited to the amount that the
owner invested in the business.

Question 2

Meaning of unlimited liability?

Answer 2

The owner’s personal assets may be seized to pay for the debts of the business.

Question 3

Limited liability vs unlimited liability?

Answer 3

Limited liability
- Losses are limited to the amount that the owner invested in the business.
- The owner’s personal assets are protected against the debts of the business

Unlimited liability
- The liability of the owners to pay debts/ claims is not limited to the business only.
- The owner’s personal assets may be seized to pay for the debts of the business.