Liability

Question 1

Define unlimited liability?

Answer 1

the owners of a business are entirely responsible for its debts, no matter the value

Question 2

What is the main benefit of having unlimited liability?

Answer 2

• business remain in control of the business and get all profits

Question 3

What is limited liability?

Answer 3

a persons financial liability is limited to a fixed sum, most commonly the value of the investment

Question 4

What is the downside of limited liability?

Answer 4

• scope for fraud ( putting business in liquidation before customers receive service they paid for

Question 5

What are some sources of finance for an unlimited liability business?

Answer 5

• owners capital
• bank finance
• leasing
• trade credit
• retained profits

Question 6

Sources of finance for limited liability companies?

Answer 6

• share capital
• bank finance
• angel / venture capital
• peer to peer lending