Liability 2.1.3

Question 1

what happens if a business with unlimited liability falls into debt

Answer 1

creditors can get the court to force the owners to pay their debts by selling their houses, cars, and other personal possessions - if they still cannot pay, they could be made personally bankrupt

Question 2

what does liquidated mean

Answer 2

turned into cash

Question 3

give 4 appropriate sources of finance for business’ with unlimited liability

Answer 3

1. bank finance (loan or overdraft)
2. leasing
3. trade credit
4. retained profit

Question 4

give 4 appropriate sources of finance for a business with limited liability

Answer 4

1. share capital
2. angel/venture capital
3. bank finance (loans need to be backed up)
4. retained profit

Question 5

benefits of starting a business with unlimited liability

Answer 5

• can keep all the profit
• full control over business
• private records