2.1.3 Liability

Question 1

What is Limited liability?

Answer 1

An investor’s liability/financial commitment is limited to the total amount invested or promised in share capital.

An investor’s personal belongings beyond this venture are protected.

Question 2

What is Unlimited liability?

Answer 2

The owners of a business are responsible for the total amount of debt of the business.

The owner may lose their personal belongings, e.g. home and cars, if the value of these is needed to cover the debts of the business.

Question 3

Is Unlimited liability low or high risk?

Answer 3

Unlimited liability is HIGH risk

Question 4

Which businesses types have limited liablity?

Answer 4

Private limited company

Public limited company

Question 5

What is meant by the term Incorporated?

Answer 5

A company or other organization formed into a legal corporation. The company is a sperate Legal entity to the person.