2.1.3 Liability

• Limited liability : business has a separate legal identity from owners so owners can only lose as much money that they've put into the business and are not responsible for the business' debts

  • Private Limited Company (LTD)
  • Public Limited Company (PLC)
• Unlimited Liability : Owners are fully responsible for any business debts so personal assets can be seized and business and owner are seen as one in the eyes of the law

  • Sole Trader
  • Partnerships
• Finance & limited liability:

  • easier for them to raise lots of finance via share capital
  • investors may be more willing to become part/share owners as they know they can only lose as much as they put in
• Finance & unlimited liability:

  • cannot use share capital
  • unlimited liability may limit the number of people they can persuade to invest and amount of money they can get of investors
  • some sources of finance may be more willing as they know that they are likely to get their money back even if the owners have to sell personal assets