Liability

Question 1

Businesses with unlimited liability

Answer 1

• Sole trader

- Partnership

Question 2

Businesses with limited liability

Answer 2

• Private limited company (owned by few shareholders)

- Private limited company (owned by many shareholders)

Question 3

Implications of unlimited liability

Answer 3

• Owners are exposed to the financial obligations of the business
• If they’re unable to pay debts, personal assets may be lost
• The same obligations apply to any unlawful acts committed by owners or employees

Question 4

Implications of unlimited liability

Answer 4

• Separate legal identities to the business, personal savings are protected
• Limited liability businesses are owned by shareholders

Question 5

What is the role of shareholders ?

Answer 5

Shareholders in a limited liability company have a significant impact on decision making.
A shareholder with a 10% share is entitled to 10% of the profits made via dividends. A majority shareholder controls the company as they have over a 50% share and therefore decide the company policy

Question 6

Sources of finance appropriate for limited liability

Answer 6

-Share capital, retained profit, venture capital, business angels

Question 7

Sources of finance appropriate for unlimited liability

Answer 7

• Personal savings, crowd funding, bank overdrafts.