2.1.3 LIABILITY

Question 1

unlimited liability

Answer 1

finances of the business are treated as inoperable from the finances of the owner

Question 2

what types of businesses have unlimited liability

Answer 2

sole traders and partnerships

Question 3

advantages of unlimited liability

Answer 3

• easy and inexpensive
• direct control over business decisions
• all profits go directly to proprietor

Question 4

disadvantages of unlimited liability

Answer 4

• personal assets can be taken to cover debts
• all risk of the business is given to owner
• owner responsible for all of payment debts

Question 5

what types of businesses have limited liability

Answer 5

private and public limited companies

Question 6

advantages of limited liability

Answer 6

• can achieve economies of scale
• can often dominate a market due to size
• easier to raise finance

Question 7

disadvantages of limited liability

Answer 7

• high start up costs
• divorce of ownership and control
• all company accounts can be inspected by the public