Definition of limited liability
A business owner is only liable for their original investments should the business fall into debt, their personal possessions are not at risk
Definition of unlimited liability
If a business has debts, the owner must pay, even if this means selling their own possessions to get the money
What are the 2 main business forms that have unlimited liability?
- Sole traders
2. Partnerships
What are the implications of unlimited liability?
- personal assets are at risk
- business and owner are seen as one legal entity, so are equally liable for the debts
What are the 2 forms of limited liability businesses?
- Private limited company (ltd)
2. Public limited company (plc)
What are the implications of limited liability?
- owner and business have separate legal identities so can be sued separately
- owner and business can own separate assets
- no protection of owners personal savings + assets
What are the suitable types of finance for UNLIMITED liability businesses? (Sole traders + partnerships)
- loans from banks
- angels
- credit cards
- crowd funding
- trade credit
- owner savings
- overdraft
What are the types of finance suitable for a LIMITED liability business? (ltd and plc)
- retained profit
- sale of assets
- share issues
- government grants
- venture capital
