Implications of limited and unlimited liability

• What are the two types of liability mentioned?

  Limited and unlimited liability
• What is limited liability?

  • Owners are only responsible for debts up to their investment
  • Provides protection for personal finances
  • Business has its own legal identity
• What does unlimited liability mean for business owners?

  Owners are personally responsible for all business debts
• What would happen to Sarah if her corner shop went into £60,000 of debt?

  She would use personal savings to pay it off
• What are the implications of limited and unlimited liability for business owners?

  • Limited liability: less personal risk, financial protection
  • Unlimited liability: greater personal risk, full responsibility for debts
• What is a sole trader?

  A business owned and controlled by one person
• How does a limited liability business differ from an unlimited liability business?

  Limited liability protects personal assets; unlimited does not
• What is the financial risk for a sole trader with unlimited liability?

  They risk personal savings and possessions
• What is the legal identity of a limited liability business?

  It has its own legal identity
• What happens to personal finances in a limited liability situation?

  They are protected from business debts